What Financial Advisers Need to Know About the Biden Administration’s Retirement Security Rule (As of April 2025) and the ERISA Nerd’s “two cents”

The Biden Administration’s push to strengthen retirement protections for American workers has been met with both praise and pushback. At the center of this effort is the Retirement Security Rule, a regulation was created that aims to ensure that all financial “professionals” act in the best interests of retirement investors.

While it was finalized in 2024, and supposed to go into effect on 9/23/2024,  the rule's fate remains in limbo as we head into mid-2025—leaving financial professionals in a state of regulatory uncertainty.

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Understanding the Retirement Security Rule: Where It Came From

This is not the first time the Department of Labor (DOL) has attempted to impose a stronger fiduciary standard on retirement advice. The Obama-era DOL issued a fiduciary rule in 2016, expanding the definition of who qualifies as a fiduciary under ERISA. That rule was struck down in 2018 by the Fifth Circuit Court of Appeals, which said the DOL overstepped its authority mainly because that rule would have allowed IRA holders to sue their adviser in court.

ERISA grants Title I participants (employer sponsored plans) direct access to courts.  Also, Title I is regulated by the DOL.  However, IRA holders fall under Title II of ERISA and do not have access to the court system.  Also, the IRS, not the DOL, regulates Titles II accounts.  So, the courts struck down the Obama rule for creating a new “right of action” (ability to go to court) for IRA holders.

Fast forward to the Biden Administration: In a renewed effort to curb conflicts of interest and protect everyday investors, the DOL released its revised Retirement Security Rule in late 2023 and finalized it in April 2024. The new version attempts to withstand legal scrutiny by refining how fiduciary status is applied to financial professionals who provide investment advice for retirement assets.  The new rule would not dramatically affect most RIAs and their investment advisers as they already have to comply with the ERISA rules when working with 401(k) participants.  However, it would dramatically effect insurance agents and brokers who would be brought under ERISA for the very first time.

The intent of the rule is clear: ensure that all advice regarding rollovers, IRA contributions, or any retirement-related transactions is in the best interest of the investor.

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Key Provisions of the Rule

Here’s what the Retirement Security Rule proposes:

• Expanded Fiduciary Definition: Financial professionals who provide "recommendations" for retirement accounts—even on a one-time basis—could be treated as fiduciaries.

• Best Interest Standard: Advisers must prioritize the investor’s financial interests over their own compensation or incentives.

• Disclosure Requirements: Advisers must clearly disclose conflicts of interest and compensation arrangements.

• Recordkeeping & Compliance: Firms are expected to have internal policies and procedures that support adherence to the rule.

The DOL emphasized that the goal is not to limit product offerings but to ensure that recommendations are based on what's right for the investor—not what pays the adviser more.

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Legal Challenges and Delays

Despite the revised approach, the new rule faced swift legal opposition. By the summer of 2024, multiple lawsuits had been filed by industry groups—arguing that the DOL was once again exceeding its statutory authority, just as it did in 2016.

Federal courts in Texas and Florida issued preliminary injunctions blocking enforcement of the rule, which was originally set to take effect on September 23, 2024.

In February 2025, the new “Trump DOL” requested a pause in ongoing appeals, stating that newly appointed officials wanted time to review the rule and its legal implications. The Fifth Circuit Court of Appeals granted this request, placing the case in abeyance (suspension) until June 16, 2025.

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Where Things Stand Now (April 2025)

• The Rule Is Finalized—but Not Enforced.
  Technically, the rule was finalized in 2024. However, due to legal stays (pauses) and the DOL’s request for review, no enforcement action is currently underway.

• The Litigation Pause Runs Until June 16, 2025.
  At that point, the DOL will either proceed with the rule, modify it, or potentially withdraw it depending on internal review and legal strategy.

• Advisers Remain Under Existing Regulations.
  For now, the existing fiduciary obligations under ERISA and the Prohibited Transaction Exemption (PTE) 2020-02 remain the baseline standard—particularly for rollover advice if you are deemed an “ERISA Fiduciary”.  (Reread the 11/5/24 blog titled “Am I an ERISA Fiduciary” https://www.erisanerd.com/blogs/am-i-an-erisa-fiduciary).

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What Financial Advisers Should Do Now

Even though the Retirement Security Rule isn’t being enforced today, advisers should not ignore its implications. In fact, the industry trend is clearly moving toward higher standards, more transparency, and greater scrutiny.

Here’s how to stay ahead:

1. Audit Your Advice Process

Even if you're not currently a fiduciary under ERISA for certain accounts, ask yourself:

• Are you making recommendations that could later be interpreted as fiduciary advice?

• Are your compensation structures clearly disclosed?

2. Stay Educated and Proactive

Regulatory shifts can come quickly once litigation is resolved. Make sure your compliance team and back office are ready for potential changes in documentation and client communications.  Be sure to subscribe to our blog for more information on this topic as it becomes available. 

3. Lean Into Best Interest Practices

Clients appreciate transparency. Use this moment to emphasize your commitment to acting in their best interest—even if you’re not currently required to under law. It builds trust and futureproofs your business.  Look into our ERISA Best Practices (CE) Course at https://www.erisanerd.com/erisa-best-practices-ce-course

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Looking Ahead: Uncertainty

Most “experts” believe that the Trump Administration will not take any action and let the “Biden Rule” die on the vine.  This is what happened with the Obama era rules that were challenged in court when the Trump administration took over the DOL the first time.

However, I would like to play “devils advocate” for a second.  I think that Trump, if he is fully informed on what the rule is, may choose to fight for it.  He may want the courts to approve the Biden Administration’s changes.

Why?

Ego!

Most everyone has focused on the fact that the Biden Rule would expand ERISA Fiduciary status to EVERYONE who works with 401k participant or an IRA.  Currently only RIA/IARs are held to “ERISA Fiduciary” status if they don’t choose a “loophole” to avoid the status.

But one thing that has been overlooked is the fact that the Biden Administration is trying to get rid of many Prohibited Transaction Exemptions (PTEs).  They are looking to make PTE 2020-02, formally known as “Improving Investment Advice for Workers & Retirees” or informally as “The Rollover Rule”, the law of the land.

The Biden Administration is literally trying to make PTE 2020-02 the only exemption available for conflicted advice (unless you are an insurance broker, then you could use the new PTE 84-24). 

It was the Trump Administration’s DOL who wrote PTE 2020-02.  So, I am not yet ruling out that just due to ego alone, the Trump administration may fight to preserve the “Biden Rule”.

Only time will tell.

So for now, we speculate for another couple months.

All eyes are on June 16, 2025. 

Well maybe not “all eyes”, but for sure this ERISA nerd’s eyes are!

Ohio Division of Securities VS Pontera?

The future is unclear for “held-away” assets and Ohio Advisers

I am writing this blog under my ERISA Nerd “pen name”. 

However, in full disclosure, it should be noted that I am also the owner and co-founder of PlanConfidence Corporation.  Plan Confidence is an SEC Registered “Internet-Only” RIA that has co-advisory agreements with many RIA firms to provide the research, advice, delivery and documentation on “held-away” accounts.  And for the ERISA covered accounts, we guarantee ERISA compliance when working with these “special” assets.  We currently use, and many of our co-advisers use Pontera and Future Capital to place trades on “held-away” accounts using our proprietary “Trade Files”.

I state all this as I am going to try and write this as fair and balanced as I can, but I think you should know my bias as I write this so you can make your own informed conclusions.

Earlier last week, I had a few advisers registered in the state of Ohio forward me an “Investment Adviser Alert” put out by the Ohio Division of Securities (which I will refer to in the rest of this article as the “Division”). 

You can read the complete alert by CLICKING HERE.

It appears that Ohio is joining states like Washington and Missouri (and possibly soon Oregon) to classify use of Pontera to trade “held-away” accounts as an “unethical” business practice.

I am going to go through a few of the sections in the notice line by line and give my “two cents worth” from an adviser’s perspective. 

IMPORTANT DISCLOSURE: I am not a lawyer.  (I was going to be one, studied all of college to become one, took the LSATs, got accepted to 2 out of the 3 law schools I applied to, and at the last minute decided to go into the financial world after college and not the legal world). So, nothing in this blog should be construed as “legal advice” or a “legal interpretation.  It’s just the interpretation of someone who has been licensed since 1997 and has been an ERISA Nerd since 2008.

That being said, here is my overall interpretation before I go into specifics:

·       The Division never mentions Pontera by name.  So, I am only assuming when they reference “one of the unregistered third-party platforms” they are talking about Pontera (as Future Capital is registered with the SEC).

·       The Division never explicitly states that it is prohibiting any adviser from using the platform, but it is definitely implied!

·       The last paragraph is encouraging as it states the Division is open to learning more about Pontera and is currently engaged in doing so.

One of the biggest concerns I see is that the Division does not like that Pontera is “unregistered”. 

After going through the talking points that Fidelity laid out last September (SEE September 2024 blog Fidelity V Pontera) the Division then states:

“As an unregistered entity, there is no financial regulator reviewing the platform’s policies, procedures, or practices for compliance with federal and state data privacy, cybersecurity, or safeguarding laws.”

This is true. 

Pontera is not registered, so they do not have (to my knowledge) any “financial regulator” that is overseeing them. 

However, Pontera does have a “Commitment to Client Protection” on their website where they spell out all of the rigorous steps they are doing to ensure data protection.  So, it’s not that their data protection measures are not under scrutiny, they are just not under any “financial regulator’s” scrutiny.  Which means we are relying on Pontera to “self-correct” any issues that may be found versus being mandated by a regulator.

The easy solution to this would be if Pontera registered with the SEC. 

However, the increased regulation and fees would probably drive up the costs as Pontera gets bigger.  That is the opposite effect of what you would want a “tech” company to do.  Costs should become lower with more adoption and not more expensive.  So, I would not hold my breath in waiting for Pontera to register unless they are compelled to do so.

And even if they did register with SEC, I don’t think that would solve the issue for Ohio advisers, as the Division states in their notice:

“In Ohio, it is a breach of the investment adviser’s fiduciary duty to access a client's account by using the client's own unique identifying information, such as username and password . See Ohio Administrative Code 1301:6-3-44(E)(1)(f)(vii).”

One could argue here that an OH adviser would not be violating this provision with Pontera as “technically” the adviser only has access to Pontera’s dashboard.  They do not have access to the client’s account.  However, it’s the next sentence that is problematic for OH advisers.

The code also prohibits an investment adviser from “indirectly, or through or by any other person do[ing] any act or thing which it would be unlawful for such person to do directly under the provisions of Chapter 1707.”

It’s the “by any other person” in this sentence that is problematic.  Technically, Pontera does have access through their technology to the client’s account.  So, as I read this, even if Pontera was registered with the SEC, it wouldn’t matter, as the law would need to change the language about accessing a user’s account via their User Name and Password.

This would also call into question the use of Data Aggregating software, as that uses the clients User Name and Password for performance reporting.  My guess is that the Division is going to turn a “blind eye” to that technology, since the adviser does not have access to affect any changes to a client’s account, even though (technically) the aggregator does. That appears to be what Washington and Missouri are doing as well.

The section on “Inadvertent Custody” is a little confusing to me. 

It spends a lot of time discussing the adviser having custody if they can deduct their fees from the customer’s account.    Through Pontera, the adviser only has access to the Pontera dashboard.  This allows them to view the client’s current holdings, all available investment options and change the Future Contributions and Rebalance accounts.  There is no section for an adviser to deduct any fees from the client’s account (although advisers would love it if they could)! 

So, the Division seems a little off base as using this reasoning for denying their advisers use.  Unless they a referring to another “unregistered third party platform” that I have never heard of that has the ability to deduct fees.  Again, I am going on the assumption that phrase refers to Pontera, but I could be wrong!

“In addition, it appears that at least one third-party platform might add the investment adviser or investment adviser representative as a supplemental or authorized user on the customer’s custodial account to navigate account authentication procedures during log-in.”

I am not sure which platform they are referring to here? 

It appears to me that they are specifically not talking about Pontera, as the Division doesn’t use the term “unregistered third party”.  In this case, I would love to know which platform they are referring to as I would love to review it.  The only other platform that I know that has similar functionality to Pontera is Future Capital.  They are an SEC registered investment adviser (RIA), but I don’t think they add the adviser as a “supplemental user”.

However, I could be wrong about that. 

So, if anyone has any ideas on which firm they are referring to, please let me know in the comments section.

“The Division questions whether it is reasonable for an investment adviser to charge an AUM fee for “managing” an account that is held away where the adviser has no authority or control over the securities that are available in the plan and where the account is automatically rebalanced by the custodian based on the customer’s stated risk tolerance and investment strategy. Advisers should consider the adverse impact that an annual AUM fee has in eroding returns on held away assets to ensure the advisers, as fiduciaries, are acting in the best interests of their customers.”

This is the most concerning statement that I read from the Division!

One that would really upset me if I was an OH adviser!

Here it makes it seem like all an adviser is capable of is automatically rebalancing the account which could be easily handled by the custodian.  And if that is true, the physical act of rebalancing the account could be easily handled by the custodian.  This assumes the Division believes that a 401(k) investor should choose an asset allocation and then never, ever deviate from it for the rest of their life.

If the Division really believes that an adviser managing an account is not worth the fees paid, then shouldn’t they apply that same logic to all qualified and non-qualified accounts alike?   Shouldn’t the division only allow the OH registered advisers the ability to set an asset allocation one-time and then have the custodian periodically rebalance the account?

If I were an Ohio registered adviser, I would be steaming mad that the Division doesn’t value an adviser can provide to a retail client.  I would be flooding their office with the various studies showing from Russell Investments, Smart-Asset, Vanguard, Kitces.com, etc showing how much extra alpha an adviser can provide their clients.

The Division does not account for advisers that run tactical allocations or ones that may shift from Growth to Value or vice versa.  It does not account for the actual “advice” that an adviser is providing their clients, which can easily be overlaid the “held-away” accounts as well (in fact, that is exactly what our software does)!

And, in my professional opinion, the Division completely miss the point with the last sentence about an annual fee eroding the return on held-away accounts. 

The fees advisers bill clients when using Pontera are taken out of a different account or paid via credit/debit card.  Technically, there would not be any erosion of returns, since the fee is not taken from the account like a brokerage account or IRA.  So, their “held-away” accounts could perform better than the accounts managed by the adviser since the fees are not being taken from the account.

And the Division is correct that, “the adviser has no authority or control over the securities that are available in the plan”.  Because of this, it is actually harder for an adviser to compliantly work with “held-away” accounts.

Every single plan is different as the employer chooses the investment options for their employees to use. 

Many of those employees have financial advisers who they rely on for help in providing holistic advice.  This means that an adviser needs to get the complete fund lineup for each one of their clients.  They then need to review all the options, overlay their asset allocation models as closely as they can given the investment options the employer chose, put that advice in writing (store it for six years), and then either:

a)       Deliver it to their client so their client can login and place the trades

b)       Trade the account for their client

And the adviser needs to repeat this process over and over again for each client they have!

There is no “block trading and rebalancing” tools or mass execution of trades for “held away” accounts.  (At least not yet, we are working on this very problem at PlanConfidence right now).

So, I strongly and respectfully disagree with the Division on their point that an adviser may not be in compliance by charging an AUM fee on held-away accounts because it is much harder and time consuming to work with held-away accounts.

“The Division is engaging with one unregistered third-party digital platform to learn more about its services and ascertain its compliance with Ohio securities licensing laws and other regulations.”

This to me, this is one of the most encouraging statements of the notice. 

To me, it says that the Division is actively engaged with Pontera to learn more about their services and how they help advisers.  Whether the Division ever comes around to the viewpoint that clients do need help with their “held away” assets and Pontera allows OH advisers to do this compliantly is another issue. 

As Ohio Administrative Code 1301:6-3-44(E)(1)(f)(vii) would need to be re-written as it currently prohibits use of a User Name/Password. 

I am not sure if the code can be amended by the Division itself or if that would take an act from the OH legislature?

Maybe someone who does know can inform me in the comments.

Until then, SEC Registered advisers are going to have an unfair advantage over state registered advisers in Ohio, as SEC advisers are able to use Pontera for their “held-away” accounts.

Is the Biden DOL Rule dead under Trump?

The Biden Administration put forth changes to section 3(21)(a)(ii) of ERISA in April 2024. 

Section 3(21)(a)(ii) of ERISA defines how an adviser can become an ERISA Fiduciary by providing “non-discretionary” advice.

Since 1975 there has been a Five Part Test to determine if you were operating as an ERISA Fiduciary.

The Biden Administration looked to amend this with a three-part test. 

Under the 1975 law, and what is currently in place, you can become an ERISA Fiduciary if you can answer “yes” to all five of these parts.

1)        Provide investment advice for a fee

2)        On a regular basis

3)        Pursuant to a mutual understanding

4)        The advice is a primary basis for investment decisions

5)        The advice is individualized for the participant or plan

If you can answer “no” to any of those questions, then you are NOT an ERISA Fiduciary.

The Biden Administration wanted to cast a wider net to include almost anyone in the financial industry to become an ERISA Fiduciary. 

Specifically, they were looking to pull in insurance professionals under the definition of an ERISA Fiduciary. 

The Biden Administration also was looking to change the existing prohibited transaction exemptions (PTE) available to financial professionals and trying to make almost everyone use PTE 2020-02.  The Biden Administration liked PTE 2020-02 because it requires the financial adviser AND their financial firm to acknowledge they are ERISA Fiduciaries under 3(21)(a). 

One of the main reasons the Biden admin wanted more financial professionals to be become  ERISA Fiduciaries is that an ERISA Fiduciary can be sued in Federal Court.  This is a rarity in the financial world since almost all contracts have mandatory arbitration agreements which prevents your clients from accessing the court system.

The Biden changes to ERISA were scheduled to take go into effect on September 23, 2023. 

However, two Texas courts pushed “pause” on the rule as several lawsuits have been filed to challenge the rule. 

In September of last year, the Biden administration filed motions to overturn the “pause” and have the rules go into effect before the court has a chance to be settled.

Now, this is where things get a little complicated. 

The courts have not yet ruled on the Biden Administration’s motion to “unpause” the rule. 

So, the question remains, what will the Trump administration do with the current court proceedings.

Almost every article I have read and podcast I have heard discussing this matter have come to the same consensus . . .the Trump administration will just pull the justice department from defending the rule in court. 

Thereby granting an immediate victory to the Plaintiffs in the two Texas courts and effectively getting rid of the Biden Administration’s changes.

I have read the Biden Administration’s changes from cover to cover.  In fact, I have it all printed out and sitting on my desk in two three inch binders.  A full chapter of the ERISA Best Practices “ethics” CE Course I created was dedicated to the Biden changes.

If you’re a FINRA Rep or an Investment Adviser Representative (IAR) the Biden changes would have had a minimal effect on your practice.  You already have to abide by most of the rules as an ERISA Fiduciary and under the SEC’s REG BI rule.

However, if you were an insurance broker or captive agent, the Biden administration’s changes will have a severe impact on the way you do business!

So, one would have to wonder, what exactly will the Trump administration do?

Again, the consensus is that he will just let the rule die on the vine.

And I am 80% convinced that this is exactly what will happen. 

Mainly due to Trump’s hatred for the Biden Administration. 

However, 20% of me thinks that he may decide to fight it out in court and have try to have it implemented.

See, the Biden changes give massive protections to hard-working Americans against the insurance industry that they never had before.  Trump may want to make it seem that he is battling for the “little guy” be ensuring they will have the right to the court system when dealing with insurance agents.  This is a right that the IRA owners currently do not have when buying insurance products (annuities). 

Also, it was the Trump 1.0 Administration that literally created PTE 2020-02. 

The same exemption that the Biden administration wanted to make the law of the land. 

Trump’s ego may influence him to push for the courts to approve the Biden changes.

However, I am not sure that the DOL Rule is very high up on his agenda.

So, if I was a betting man (which I am not), I am 80% sure that he is going to let this die on the vine.

However, I am also 80% confident that within the next couple of years, he will create his own rule for the DOL that will be very similar to the Biden rule that will pull the insurance industry under the umbrella of requiring them to operate as ERISA Fiduciaries.

Only time will tell.

Sarasota Florida – Paradise or the new technology hotspot?

Last night I was honored to be one of the 300+ guests for the inaugural Sarasota Tech Summit.

As the owner of a startup fintech company in Sarasota, I was highly intrigued. 

Sarasota is on the “suncoast” of western Florida.  We are an hour south of Tampa and have some of the most beautiful beaches with white powdery sand that does not get hot! 

Siesta Key beach is constantly on Top 10 lists of the country’s greatest beaches. 

However, most of us “locals” don’t hang out at Siesta Key as it is very touristy. 

I put “local” in quotes as almost everyone I have met here (in the past eleven years) is from somewhere else. 

I am from Chicago.  I have met many people from Chicago and the Midwest.  Many of my friends are from Ohio (and extremely annoying about THE Ohio State Buckeyes).  I have met many from Boston and New York and all over the world. 

The one thing we have in common, we all moved to Sarasota to live and work from paradise.

And the fact that there are not many “locals” here was one of the themes from last night.

Since we live and work in paradise, many people are continuously drawn to our town.  In fact, Covid was really good for Sarasota (and most of Florida) as working remote became en vogue. 

Sarasota was able to attract many highly skilled tech workers who could (literally) Zoom themselves into work everyday.  And, Sarasota has been a retirement destination for many who exit companies and want to live a laid-back Florida lifestyle.

So, imagine my surprise when one of the themes last night was making Sarasota a “tech hub” on the Suncoast. 

St Pete and Tampa are an hour north and Miami is three hours south. 

They are already tech hubs. 

Sarasota is known for vacations and retirement.  For arts and excellent sea food.

But last night the starting pistol went off.

Sarasota had a group of 300+ individuals that want to see it become the next big thing in tech destinations!

The numbers are actually much larger than that, but only 300 people were allowed to get tickets to the event.

Assuming there will be another event next year, I predict it will be twice the size.

I predict that there are many wanting Sarasota to become a “tech” town as discussed last night.

And I am one of those people. 

I am proud to be part of the inaugural Sarasota Tech Summit.

I am proud to be part of a growing community of tech individuals who get the privilege of working in paradise.

And I am proud of @Raymmar Tirado, @Toli Marchuk, @Pete Peterson (all of whom I knew when we all had offices at the Hub which was one of the coolest co-working spaces ever known) and @Vladimir Ljesevic who I just recently met last month.

You four will be credited for organizing a movement here in paradise!

You four will be credited with firing the “starting pistol” on putting Sarasota on the map for all of us who make a living in the technology industry!

I left the event proud to be a small part of this growing community in Sarasota.

I will do my best to help put Sarasota on the map as the next tech hub in Florida as I build and scale my fintech and (hopefully) have such a large exit that everyone in fintech will know where Sarasota is!

Why you should do your Annual Retrospective Review now!

Happy new year!

I hope that 2025 is the best year you and your family ever experience.

As an ERISA Nerd, I am encouraging all my clients and investment adviser friends not to wait until the end of June to do your required Annual Retrospective Review. 

And there is a specific reason why.

As you know (or should know), you need to complete a “Rollover” form that is compliant with Prohibited Transaction Exemption 2020-02 (PTE 2020-02) when you are an ERISA Fiduciary and you recommend a rollover to an IRA where you will earn more compensation than you are currently earning.

In general, you are an ERISA Fiduciary if you trade your clients 401(k) with discretion or if you charge your client for advice on how they should manage their 401(k).

For a more detailed explanation on “when” you are an ERISA Fiduciary and when you are not, check out our previous blog titled, “Am I an ERISA Fiduciary”. 

Here’s an example of when you are an ERISA Fiduciary:

Assume you’re charging your client 75 bps per year to trade their 401(k) account every quarter.  Your client switches jobs and asks you what to do with their money in their 401(k). You recommend they move their money into an IRA with your firm so you can manage their money for 1% per year.

In the above scenario, it would be “illegal” for you to accept that rollover and earn any compensation due to the “self-dealing” rules under ERISA law.

Now, the Department of Labor (DOL) knows that “in real life” (or IRL – like the kids say) your clients want to continue to work with you, even though moving that money is prohibited under the law.

So, the DOL has created a “legal” way for you to move the money into an IRA and get paid the additional compensation. 

They call it a Prohibited Transaction Exemption or “PTE” for short.

So, as long as you follow the DOL’s exemptions to the “T”, you will be able to get paid for your “illegal” activity.

The last time the “Rollover” exemption was updated was in the year 2020 under the Trump administration.  The DOL created PTE 2020-02 and spelled out exactly what is necessary for you to be “exempted” from the Self-Dealing Rules of ERISA law.

As part of the PTE 2020-02 rule your firm needs to have in writing (not should have, but needs to have) the following:

·        Policies and Procedures designed to ensure compliance with the Impartial Conduct Standards of ERISA

o   Duty of Prudence

o   Duty of Loyalty

o   Charge reasonable compensation

o   Comply with “Best Execution” laws

o   Make no misleading statements

·        Acknowledge to your client you are operating as an ERISA Fiduciary under Title I of ERISA

·        Conduct a prudent analysis and document

o   Alternatives to the rollover

o   A review of all investment options within the plan

o   A comparison of the fees, expenses and services between the plan and recommended IRA

o   Determine if the employer pays for any expenses or services

·        Describe the services you will be providing

·        Mitigate any conflicts of interest

·        Disclose to your client any conflicts of interest that cannot be mitigated

·        Document the reason(s) the rollover to an IRA is in the best interests of the client

All of this MUST be completed prior to completing the rollover to the IRA. 

SIDENOTE: PTE 2020-02 is also needed when you recommend a client move an IRA to another IRA or if you change an IRA account from commission based to fee based (or vice versa). It’s not just needed when moving an ERISA account to an IRA.  

If you work for a large RIA, wirehouse , broker/dealer or insurance company, your company should have provided you the required forms needed and training on how to complete the form and properly provide the required fiduciary acknowledgment and disclosures to your client.

Your firm should have policies and procedures in place in “approving” all your rollover, IRA to IRA business, etc.  They should have made sure you followed all their requirements before the rollover was completed and your work should be done.

However, if any of your documentation is incomplete or if you have Chief Compliance Officer (CCO) duties for your firm, your work is not done yet.

You need to complete a particularly important step before June 30th.

You need to complete an Annual Retrospective Review of your policies, procedures and forms that were completed. You do not need to review every rollover from the previous year.  You can review a sample of them, if the sample size is large enough to determine all the advisers in your firm have complied with your policies and you determine your policies comply with the requirements of PTE 2020-02.

You MUST (there’s that word again) create a file with the samples of all forms that were pulled, write down how you conducted the review and the results of your review.  All the above needs to be condensed down into a written report that is presented to one of the most senior officers of your financial firm.

The senior officer must “certify” they reviewed the report and agreed with the findings, thus putting “their butt on the line” if it’s not done properly.

The report, the written certification and all the supporting documentation must be kept for a minimum of six years.  At any point in time, the DOL could request all that information from any firm to ensure they are complying with PTE 2020-02. 

You have 10 days to provide the DOL with the written report, certification and supporting documentation.  If you do not provide this information to the DOL within 10 days, at worst, they can prevent you (or your entire organization) from doing any rollovers for the next 10 years!

So, it is especially important that every financial firm does their Annual Retrospective Review before June 30th each year.

But here is why it may be a great idea to do the review now.

If you find any violations of your policies during your review, the DOL allows you to correct them within 90 days.

And here is the kicker:

“If the violation did not result in investment losses to the retirement investor or the financial institution made the retirement investor whole for any resulting losses, the financial institution can correct the violation and notify the Department within 30 days of correction.”

If you find any violations, you need to ensure that your client either did not have any investment losses or you need to payback any investment losses before you report the violation to the DOL and add it to your Annual Retrospective Review.

You would much rather find any violation now, when the stock market is still high, versus later in the year, just in case the markets turn south. 

You want to find any violations now before your clients may lose any money in the markets.  Or you and your firm may have to pay your client back the losses.

And the DOL is on record that there are no “small” violations of their rules. 

You need to comply with the whole PTE 2020-02 rule, or you are will be in violation of the “self-dealing” rules of ERISA. 

So, just in case you need to correct any violations of your PTE reliance, you will want to do it before there might be any losses in your clients’ accounts.

Waiting to do your required Annual Retrospective Review until June could end up being very costly for some. 

But hopefully not for any of my fellow ERISA Nerds!

Stay confident my friends!

SHAMELESS PLUG: If you need a refresher on PTE 2020-02 and sample forms, ADV language, Annual Retrospective Review verbiage, etc, check out our course for Chief Compliance Officers by CLICKING HERE.

This update has been written by Kevin T Clark, RF™.

 Kevin is an “ERISA Nerd” and one of only a hundred(ish) Dalbar certified Registered Fiduciaries (RF™) in the United States. 

 Kevin T Clark, RF™ is the CEO and Co-founder of PlanConfidence Corporation. 

All opinions expressed are those of the author and not that of PlanConfidence Corporation nor any other firm or individual.

 PlanConfidence Corporation has created proprietary software to scale the research, advice, documentation and delivery of advice for RIA firms to their “held away” 401(k) accounts.

 PlanConfidence ensures ERISA compliance through their proprietary software.

 PlanConfidence Corporation is also an SEC registered “internet only” investment firm ensuring compliance with REG BI through their proprietary software.

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