DOL Extends Enforcement Relief to Ensure Compliance with Prohibited Transactions Exemption
In a new Field Assistance Bulletin 2021-02, the DOL extended enforcement relief under a new temporary policy on prohibited transactions rules applicable to investment advice fiduciaries. The new policy provides additional transition relief to investment advice fiduciaries from certain obligations under Prohibited Transaction Exemption ("PTE") 2020-02 ("Improving Investment Advice for Workers & Retirees").
As previously covered, PTE 2020-02 provides relief for certain fiduciaries who provide investment advice (within the meaning of ERISA and IRC Section 4975 ("Tax on Prohibited Transactions")) with respect to ERISA-covered retirement plans and individual retirement accounts. The Bulletin affirmed that "investment advice fiduciaries who rely on the exemption must render advice that is in their plan and IRA customers’ best interest in order to receive compensation that would otherwise be prohibited in the absence of an exemption, including commissions, 12b-1 fees, revenue sharing, and mark-ups and mark-downs in certain principal transactions. The exemption expressly covers prohibited transactions resulting from both rollover advice and advice on how to invest assets within a plan or IRA." PTE 2020-02 became effective on February 16, 2021. In the Bulletin, the DOL provided additional enforcement relief as follows:
it will not pursue prohibited transactions claims for the period from December 21, 2021, through January 31, 2022, against investment advice fiduciaries who act "in good faith" to comply with the "Impartial Conduct Standards" (generally, act within the "best interest" standard, charge no more than reasonable compensation and make no misleading statements) for transactions covered by PTE 2020-02, and will not treat such fiduciaries as violating the relevant prohibited transaction provisions;
through June 30, 2022, it will not pursue prohibited transactions claims against a fiduciary otherwise in compliance with PTE 2020-02 who fails to comply with the documentation and disclosure requirements for rollovers in PTE 2020-02, and will not treat such fiduciaries as violating the relevant prohibited transaction provisions; and
all other requirements of the exemption will be subject to full enforcement on February 1, 2022.
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