IRA Rollovers and the Best Interest Rule

Take-Away: The Department of Labor (DOL) recently proposed a revision to its best interests fiduciary rule. The proposal would amend the DOL’s existing five-part test with respect to IRA rollover recommendations.

The DOL proposed revision also extends to advice that pertains to the selection of investment options for a 401(k) account. The goal of this proposed amendment is to make sure that advice given to plan sponsors about 401(k) plans are considered to be fiduciary covered recommendations.

The DOL proposal also covers retirement advice provided on a one-time basis, such as a recommendation to a plan participant to roll over 401(k) assets into a traditional IRA or to an annuity.

Apparently there are also some ‘tweaks’ to the existing prohibited transaction exemptions and modifications to existing best interests provisions that are used by independent insurance brokers [Rule 84-24.]

The new DOL proposal also reflects a ‘shift’ away from its prior proposals that were previously struck by federal courts, which replaces the best interests fiduciary rule coverage from those who provide investment advice for a fee [the prior standard] to one where the best interests fiduciary rule(s) applies to client relationships of trust and confidence [the new standard].

The DOL now invites public comment to its proposed rule. The DOL proposed revision to it’s best interests fiduciary rule is about 170 pages long, which is frankly why I skipped reading it. The DOL is required to come back and report what it heard from the public comments received and how its proposed best interests fiduciary rule was further changed (if any.)

As I learn more [while not spending my time reading a 170 pages of turgid rules] I will pass it along.