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News Items, by Subject

Distributions - rollovers

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Understanding the 'Same Property' Rule for IRAs
"For IRA-to-IRA or Roth-to-Roth 60-day rollovers, the same property received is the property that must be rolled over. These rules also apply to SIMPLE and SEP IRAs. An individual cannot receive a distribution of cash and then roll over shares of stock that he purchases with the cash or that he currently owns. If cash is distributed from an IRA, then cash must be rolled over within 60 days." (Slott Report)
SEC No-Action Letter Offers Guidance for Processing Rollover Checks
"Banc West Investment Services asked the [SEC] to clarify its stance on the potential conflict between FINRA suitability determinations called for by rollover decisions and, on the other hand, SEC demands to forward customer checks within a day of receipt.... The letter ... lays out further stipulations for BWIS[.]" (planadviser)
Why Rollover IRAs May Be a Bad Idea
"For the vast majority of 401(k) plan participants, ... it does not make sense to roll over their 401(k) balances from a prior employer into an [IRA}.... [1] Stable value funds are not available ... [2] IRA advisors may not be fiduciaries ... [3] IRA rollover = higher fees ... [4] IRA rollover balances are too small to meet minimums ... [5] Transaction fees are likely with IRAs ... [6] IRAs offer less protection from creditors and lawsuits ... [7] Loans are not available." (Lawton Retirement Plan Consultants)
What to Expect When You Do a Retirement Account Rollover
"Keep an eye on the process online and maintain any paperwork sent to you about the transfer.... [C]heck to make sure that the amount that left your old account lines up with the amount received in your new account. Consider leaving the old account open for a few weeks to collect any residual interest or dividends in the old account, then make sure those are transferred over as well. You should receive a Form 1099-R from the distributing firm the following year ... Use the paperwork and online history to make sure the transactions line up properly." (Financial Finesse)
[Opinion] Pension Rights Center Comment Letter to EBSA on Proposed Exemption Involving Retirement Clearinghouse, LLC (PDF)
"To better inform and protect participants we recommend that the conditions of the proposed exemption be more specific in several areas.... [A]ccount holders should be fully informed of their rights to place their accounts with another IRA provider or to cash out on demand ... [C]onsider imposing limits on some of the fees, particularly the monthly administration fee and the transfer and communication fees to be assessed after RCH identifies a new employer.... [I]nclude a statement that participant records must be maintained until the accounts are distributed ... [R]equire an appeals procedure for mistakes or disputes." (Pension Rights Center)
[Guidance Overview] IRS Issues Updated Eligible Rollover Distribution Notices
"The IRS recently updated its model notices in [Notice 2018-74] to include a number of significant changes in the law. There are two model notices, one for payments from a Roth account and one for payments not from a Roth account. Two changes addressed in the updated model notices apply to participants of most retirement plans, while others only apply to participants in certain governmental plans." (Frost Brown Todd LLC)
Pros and Cons of Completing a Rollover Before Year-End
"[A]ny money that leaves one account must be out before December 31st, but beyond the common timeframes for rollovers, it's okay if the money doesn't transfer into the receiving account until after January 1st. One thing that's important to keep in mind for clients subject to RMDs, however, is that the custodian likely will not track that last minute change, and it will be up to the advisor to make sure to account for any year-end balance increases for the following year's RMD." (Nerd's Eye View)
[Guidance Overview] IRS Extends Transition Relief for New Escheated IRA Tax Withholding, Reporting Rules
"[T]he extended transition relief applies to payments made before the earlier of January 1, 2020, or the date it becomes reasonably practicable to comply with the new rules.... [Rev. Rul. 2018‑17] is silent as to whether the IRA owner may roll the escheated IRA over to an eligible IRA and, if the rollover is permitted, when the 60-day period to make the rollover begins.... The Revenue Ruling is also silent as to whether an IRA owner who is under age 59‑1/2 at the time of an escheatment (in those states that escheat before the IRA owner reaches age 70‑1/2) would be liable for the 10% penalty tax for early IRA distributions.... [It also] does not address the tax withholding and reporting requirements for a SEP, SIMPLE, or Roth IRA." (Morgan Lewis)
Combining Small 401(k) Accounts Helps Preserve Retirement Saving
"Consolidation helps the employees accumulate a more adequate level of retirement saving, because research shows that hitting the $20,000 milestone makes participants much more likely to preserve their balances. And consolidation helps sponsors fulfill their fiduciary duty and cut aggregate plan costs by reducing the number of stranded accounts. Consolidation helps providers to increase assets under management and reduce the headaches associated with mandatory distributions, stranded accounts, and uncashed checks for missing participants." (Alicia Munnell, via MarketWatch)
DOL Advisory Opinion Addresses Small Retirement Account Balance Auto-Portability Program
"The DOL explained that plan fiduciaries would be subject to ERISA's fiduciary standards -- and any associated liability -- when they opt to participate in the RCH Program under which plan accounts will be transferred to default IRAs.... [Advisory Opinion 2018‑01A] clarified, however, that neither the plan fiduciaries choosing to participate in the RCH Program nor the fiduciaries of the new employer plan that agrees to accept the roll-in transactions would be considered fiduciaries for purposes of the transfer of assets in the default IRA into the new employer's plan." (Buck)
[Guidance Overview] DOL Guidance on Auto Portability
"Concerning the ERISA implications of a plan sponsor for electing to participate in the RCH Program, the DOL indicated that choosing to have a plan participant in the RCH Program is a fiduciary decision. The decision must, therefore, be prudent and solely in the interest of plan participants and beneficiaries. The relevant plan fiduciaries must also determine that the RCH Program is a necessary service, a reasonable arrangement, and that the compensation paid to RCH is reasonable.... The DOL further concluded that neither the plan sponsor of the former employer nor the new employer would be acting as a fiduciary in connection with a decision to transfer the individual's default IRA into the new employer's plan." (The Wagner Law Group)
[Official Guidance] Text of DOL Advisory Opinion 2018-01: Retirement Clearinghouse Auto-Portability Program (PDF)
"[The] portability services related to your request involve: [1] automatic rollovers of mandatory distributions ... and account balances from terminated defined contribution plans into default IRAs ... and [2] the subsequent automatic roll-in of funds in such default IRAs to an individual account plan maintained by a new employer when the IRA owner changes jobs.... [It] is the view of the Department that the plan sponsors of the former and new plans would not be acting as a fiduciary with respect to the decision to transfer the individual's default IRA into the new employer's plan.... Absent affirmative consent of the IRA owner/participant, RCH acts as a fiduciary... in deciding to transfer the individual's RCH default IRA to the individual's new employer plan.... Similarly, absent affirmative consent of the IRA owner/participant, in situations where a default IRA maintained by a third party record keeper is transferred to an RCH default IRA acting as a conduit to facilitate the transfer to a new employer's plan, RCH acts as a fiduciary ... in directing the transfer of the individual's default IRA to the RCH default IRA and subsequently to the new employer's plan." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
[Official Guidance] EBSA Invites Comments on Proposal Related to Retirement Asset Auto Portability
"[EBSA] today invited public comment on a proposed exemption related to the consolidation of small retirement savings accounts in 401(k) plans and IRAs when workers change jobs.... [ERISA] and the Internal Revenue Code of 1986 prohibit a plan or IRA fiduciary from using its discretion to cause the plan or IRA to pay the fiduciary a fee. The Department has the authority, however, to grant exemptions that are protective of and in the interests of plan participants and IRA owners. The Department looks forward to receiving input from the public, including any data or factors that it should consider as part of the exemption, including protective conditions for participants and beneficiaries.... Any such comments or requests should be sent either by e-mail ... or by FAX ... within 45 days." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
Recommending Rollovers in the Evolving Regulatory Environment, Part 3
"[R]egardless of which rule is being applied, to satisfy the best interest and loyalty standards, an advisor (of a broker-dealer or an RIA) must use and document a process of gathering and carefully and professionally considering the relevant information.... What are the relevant factors? ... [T]he two best sources are Regulatory Notice 13‑45 and the DOL's Best Interest Contract Exemption (BICE)." (Drinker Biddle)
[Guidance Overview] IRS Issues Revised Model Rollover Notices
"If you use the IRS model notices for eligible rollover distributions, you should update yours to the new standards. If you use an alternative notice (which is also permitted), you should modify it to address the issues in the new models.... For the practitioner community, Notice 2018‑74 serves as a helpful checklist of recent rollover changes." (Ferenczy Benefits Law Center)
[Guidance Overview] IRS Updates Safe Harbor Explanations for Eligible Rollover Distributions (PDF)
"IRS has updated the model notices retirement plans use to inform participants receiving eligible rollover distributions about tax information applicable to their benefits.... In addition to providing the updated notices ... the IRS provides editing instructions ... for those plan administrators who prefer to selectively modify notices that they have edited by omitting information irrelevant to their own plans or adding information that is not inconsistent with 402(f), as permitted." (Buck)
[Guidance Overview] Recommending Rollovers in the Evolving Regulatory Environment, Part 2
"Reg BI goes beyond suitability. The SEC also says that a rollover recommendation involves a material conflict of interest. This is because a broker-dealer will earn commissions or other fees as a result of the recommendation, whereas 'a recommendation that a retail investor leave his plan assets with his old employer or roll the assets to a plan sponsored by a new employer likely results in little or no compensation for a firm or a registered representative.' ... The SEC goes on to say that broker-dealers have an obligation to mitigate the financial conflict." (Drinker Biddle)
[Official Guidance] Text of IRS Notice 2018-74: Safe Harbor Explanations - Eligible Rollover Distributions (PDF)
34 pages. "This notice modifies the two safe harbor explanations in Notice 2014‑74 ... that may be used to satisfy the requirement under Section 402(f) of the Internal Revenue Code that certain information be provided to recipients of eligible rollover distributions. The safe harbor explanations as modified by this notice take into consideration certain legislative changes and recent guidance, including changes related to qualified plan loan offsets ... and guidance issued on self-certification of eligibility for a waiver of the deadline for completing a rollover ... and include other clarifying changes.

"To assist with the implementation of the modified safe harbor explanations, this notice contains two appendices. Appendix A contains two model safe harbor explanations: one for distributions that are not from a designated Roth account, and a second for distributions from a designated Roth account. Appendix B provides instructions on how to amend the safe harbor explanations contained in Notice 2014‑74 to reflect the revisions included in the modified safe harbor explanations in Appendix A." (Internal Revenue Service [IRS])

How an Indirect Retirement Account Rollover Can Go Wrong and How to Avoid It
"[An individual received] a full distribution from her traditional IRA because the mutual fund it was invested in had been closed by the fund company.... [T]he fund company withheld 10% for federal income taxes.... To avoid taxes and penalties on the amount withheld, she will need to come up with that 10% amount to make the indirect rollover a complete rollover. Otherwise, she will incur taxes and penalties for the amount withheld that won't get into the new IRA within the 60 day deadline." (Financial Finesse)
IRS Allows Rollover Despite Deceased Spouse's Failure to Designate a Beneficiary
"The decedent was a participant in an eligible 457 retirement plan[,] ... died before reaching the age of distribution [and] did not designate a beneficiary under the retirement plan, making the decedent's estate the beneficiary of the account.... The IRS concluded [in PLR 201821008] that the taxpayer can be treated as having received the distribution from the plan which was eligible to be rolled over into a personal IRA account." (Butterfield Schechter LLP)
My Husband Made Me Do It: IRS Approves Reason for Waiving 60-Day IRA Rollover Deadline
"In PLR 201822033, the fact that the funds were sitting in the account uninvested and never used is a plus. But, the excuse of missing the deadline because she relied on her husband and had a 'misinformed belief' about the rules is not typical for approval." (Appleby Retirement Dictionary)
[Guidance Overview] IRS Resolves Yet Another Failure to Designate a Beneficiary for a Retirement Account
"[IRS PLR 201821008] is yet another case of a failure to properly designate a beneficiary of a retirement account. In this case, the IRS remedied the issue by approving the surviving spouse's rollover of a Governmental 457(b) account to her own traditional IRA, even though the decedent's estate was the beneficiary of the 457(b) account. The IRS considered the spouse's rights and control over the estate[.]" (Appleby Retirement Dictionary)
[Guidance Overview] Tax Reform Requires Plan Sponsors to Update 401(k) Plan Special Tax Notices
"In several places in the 2009 IRS model 402(f) special tax notice ... references are made to the 60-day rollover requirement and consequences that flow from failing to make a rollover within that time. Because TCJA creates an exception to these consequences, the model special tax notice ... needs to be updated ... [T]he plan administrator is ultimately responsible for making the required special tax notice disclosure to the participant, and could face a potential breach of fiduciary duty suit under [ERISA] to the extent a participant relied on any inaccurate or misleading statements." (Kilpatrick Townsend)
[Guidance Overview] U.S. Tax Reform Impacts Roth IRA Conversions
"Some have questioned whether the new legislation permits Roth IRA conversion contributions made in 2017 to be recharacterized in 2018, given the December 31, 2017 effective date of the change.... The IRS has apparently informally stated that Roth IRA conversion contributions made in 2017 are still permitted to be recharacterized in 2018 up to the October 15, 2018 deadline, but hopefully it will issue formal guidance confirming this soon." (Morgan Lewis)
The Role of IRAs in U.S. Households' Saving for Retirement, 2017 (PDF)
"More than one-third of U.S. households owned individual retirement accounts (IRAs) in 2017.... More than one-quarter of U.S. households owned traditional IRAs in 2017.... More than half of traditional IRA-owning households indicated their IRAs contained rollovers from employer-sponsored retirement plans.... Traditional IRA-owning households with rollovers cite multiple reasons for rolling over their retirement plan assets into traditional IRAs.... Only 12 percent of US households contributed to traditional or Roth IRAs in tax year 2016, and very few eligible households made catch-up contributions to traditional IRAs or Roth IRAs." (Investment Company Institute [ICI])
Roth IRAs: Favored for Annual Contributions, Neglected for Rollovers from Company Plans
"The tax on moving funds into a Roth IRA may be sharply reduced by making a series of partial rollovers ... [which] can prevent the taxable income on conversions from piling up into higher tax brackets. Converting just 5% or 10% of plan funds every year can convert them all over time with minimum income tax cost." (Slott Report)
60-Day Rollovers: What Happens When Multiple Checks Have Been Issued?
"Individuals who receive multiple distributions from their IRA can generally roll over only one of the distributions as a 60-day rollover within a 12 month period.... There is one exception to this part of the rule. If an individual receives more than one check, from the same IRA, on the same day, then all distributions can be rolled over. This could happen if a custodian issues a separate check for separate investments in one IRA.... On the flip side of the 60-day rollover transaction, an individual can do as many deposits as they wish in order to complete a 60-day rollover." (Slott Report)
Transferring IRA Money to a Health Savings Account
"People who still qualify to make HSA contributions can make a one-time rollover from an IRA to an HSA, which can be a good way to build up the account if you don't have other cash to contribute. You must currently have an HSA-eligible health insurance policy with a deductible of at least $1,300 for single coverage or $2,600 for family coverage. The amount you can roll over is the same as your annual HSA contribution limit[.]" (Kiplinger)
Disability Plan Can't Offset Pension Benefits Rolled Into IRA
"The Verizon SPD warned that certain benefits offset long-term disability benefits, including 'pension plan benefits from a Verizon pension plan if you elect to receive them.' The case turned on the phrase 'elect to receive.' ... [T]he 5th Circuit held that because the pension benefits were rolled over into an IRA, [the participant] did not 'receive' them. Thus, MetLife could not offset those pension benefits." [Thomason v. Metro. Life Ins. Co., No. 16-10634 (5th Cir. July 18, 2017; unpub.)] (Thompson Coburn)
401(k) Distribution Rules: Frequently Asked Questions
"When am I eligible for a 401(k) distribution? ... What's a hardship distribution? ... When can I rollover a 401(k) distribution? ... Can I leave my money in my 401(k) plan after I terminate employment? ... When must I start taking Required Minimum Distributions from my 401(k) account? ... How are 401(k) distributions taxed? ... How are distributions of Roth 401(k) deferrals taxed?" (Employee Fiduciary)
[Opinion] 401(k)s Need to Be Easier to Move from Job to Job
"[In] most cases as employees move from one large employer with a low-fee 401(k) to another, the smartest move would be to roll over their balances from the old plan to the new plan. But given the enormous hurdles, participants are much more likely to cash out or move their balances into a high-fee IRA. Cashouts and high fees dramatically reduce balances at retirement. This problem is fixable." (Alicia Munnell, via MarketWatch)
[Guidance Overview] June 9 Is the Fiduciary Rule Launch Date After All (PDF)
"In this latest set of FAQs, DOL describes three different communications to participants about increased contributions, apparently from paid service providers.... The distinctions DOL may be hinting at in these FAQs, however, are not productive. The Final Rule is explicit in generally including recommendations about distributions as fiduciary advice, but says nothing about contributions ... As a matter of both statutory interpretation and retirement policy, contributions present a very different case from that of distributions. Given the benefits to both participants and the retirement system of increased contributions, retirement service providers should not be exposed to fiduciary claims if and when they recommend that participants increase contributions, even if it also serves the provider's economic interest for them to do so." (Eversheds Sutherland)
The 99% Rule for Spousal Beneficiaries of Retirement Accounts
"When a spouse chooses to remain a beneficiary of an IRA, they are able to take penalty-free distributions from the account at any age and at any time.... The second option for a spouse beneficiary, and one available only to a spouse beneficiary is to ... [take] a distribution from their deceased spouse's IRA or a beneficiary IRA they inherited from the spouse and [move] the funds, either directly, or indirectly within 60 days, to their own IRA.... Once the funds are deposited into their own IRA, they are treated as if they were always in the account. There is no way, at this point, for the surviving spouse to change their mind and be treated as a beneficiary." (Slott Report)
Why Wait to Retire to Take Control of Your 401(k)?
"If you're 59-1/2 years old and still working, you have the ability to roll over money from your 401(k) into an IRA.... There are four reasons why you should consider an in-service rollover: [1] You are in control of your money.... [2] An IRA gives you more investment options to choose from.... [3] There are more safe havens for your money in an IRA.... [4] You can automatically set up your account as a multigenerational IRA (or 'stretch IRA')." (Chad Slagle, via Kiplinger)
Rollover Roulette: Rollover, Direct Rollover, Direct Payment, Direct Transfer or Transfer (Part 2: Potential Horrible Consequences)
"The only way that a beneficiary may move inherited eligible retirement plan monies to an inherited IRA is through a 'direct trustee-to-trustee transfer.' ... A 'direct rollover' is available only to plan participants (and their surviving spouses) and requires that the monies be paid directly to the plan participant's new employer's eligible retirement plan or IRA. A 'direct rollover' is not subject to the 60-day rule.... An IRA owner can also run into trouble if he or she confuses a 'rollover' with a 'transfer' and, as a result, does more than one rollover between IRAs in a 12-month period." (Morgan Lewis)
Rollover Roulette: Rollover, Direct Rollover, Direct Payment, Direct Transfer, or Transfer (Part 1: The Terminology)
"Using one 'rollover' term when you really mean another can result in horrible federal income tax consequences to a plan participant or IRA owner and ... Plan sponsors, plan administrators, human resources personnel, trustees, custodians, investment advisors, and anyone else who deals with retirement plans and IRAs need to be careful with the words used in plan and IRA materials (particularly distribution forms, summary plan descriptions, and IRA disclosure statements) and when these terms come up in conversations with plan participants or IRA owners." (Morgan Lewis)
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 39
"Even though the DOL fiduciary rule is being delayed, other regulators have indicated their interests in protecting participants from inappropriate recommendations to take plan distributions and roll over to IRAs.... The regulators appear to be harmonizing around the type of analysis and investigation required to make a suitable or prudent recommendation." (
Thinking Beyond Retirement: Your Plan as a Destination
"[F]or sponsors looking to help employees save and spend retirement wealth within the plan, here are five plan design options for you to consider: [1] Remove age restrictions.... [2] Consider greater withdrawal flexibility.... [3] Allow for incoming rollovers.... [4] Offer investment options for retirees.... [5] Offer retirement advice and education." (Vanguard)
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 38
"Combining the language in the Risk Alert with the language in the footnote, the [SEC's Office of Compliance Inspections and Examinations (OCIE)] is saying that recommendations to participants to take distributions from plans ... and rolling over to an IRA ... will be scrutinized. It also suggests that the OCIE favorably views FINRA's analysis in Regulatory Notice 13-45." (
IRA Rollovers: Does Your Due Diligence Meet Regulatory Requirements?
"This memorandum suggests a process for information data gathering for a QRP-to-IRA rollover, or an IRA-to-IRA rollover, under the DOL's Best Interest Contract Exemption (BICE)... This analysis incorporates requirements imposed by other sources of law. The suggested process could be adapted to other regulatory regimes, although the requirements imposed upon financial advisors under other regulatory regimes are usually less strict than those applied under BICE." (Ron A. Rhoades, JD, CFP)
Planning to Keep Your 401(k)? Be Careful When You Reach Age 70-1/2
"With IRAs, RMDs must be calculated separately for each account, but the amounts can then be added together and distributed by any one of the IRAs.... In the case of an employer-sponsored plan such as a 401(k), the RMD must be calculated separately and distributed separately from each plan.... Employer-sponsored Roth accounts are subject to RMDs.... If you're still contributing to your employer-sponsored plan, you may be able to delay taking RMDs." (Vanguard)
[Guidance Overview] Breaking Down the Three Key Elements of the DOL Fiduciary Rule
"All three elements described in [ERISA] section 3(21)(A)(ii) -- [1] a fiduciary [2] that renders (non-discretionary) investment advice [3] for compensation -- must be present in order for the Rule to apply to an advisor communicating with a plan participant or an IRA owner.... [The Rule] broadens the definition of 'investment advice.' More precisely, 'retirement investment advice' that's rendered to [1] participants in ERISA plans such as 401(k) plans, profit-sharing plans, money purchase pension plans, and defined benefit plans, as well as [2] owners of IRAs and participants in non-ERISA plans. Note that the Rule does not pertain to investment advice rendered to those investing in taxable accounts and non-retirement accounts. That retail environment remains within the purview of the SEC." (Morningstar; free registration may be required)
Rollover Relief Will Come with IRS Scrutiny in 2017
"Proceed with caution if you are using the new self-certification procedure. You should be aware that self-certification is not the same as a waiver of the 60-day rule. You are not necessarily completely off the hook. When you file your taxes, you may report your contribution as a valid rollover on your tax return, but the story does not end there. The IRS can still later audit your return and determine that a rollover was not appropriate." (Slott Report)
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 29
"What are the relevant factors for evaluating whether a participant should take a distribution? In other words, what information does an adviser need to gather and review? In BICE, the DOL identifies three specific types of relevant information about the retirement plan.... Those factors, and other relevant matters about the plan, need to be evaluated. Of course, that means that information needs to be obtained." (
Are HR Employees 'Investment Advisors' under the DOL Fiduciary Rule?
"So long as an employee receives no additional compensation for the advice-related activities above and beyond his or her normal salary, an HR employee should be able to explain plan options to participants without incurring ERISA fiduciary liability.... On the other hand, an employee whose job description included assisting plan participants in selecting investment options in a self-directed 401(k) plan probably would be considered an ERISA fiduciary." (Thompson Coburn)
Interesting Angles on the DOL's Fiduciary Rule, Part 28
"Under the DOL's fiduciary regulation, the recommendation of a plan distribution and IRA rollover will be fiduciary advice, subject to the best interest standard of care and the prohibited transaction rules. But, what if a participant takes a distribution and rolls over into an IRA with an adviser ... without a recommendation by the adviser?" (
[Guidance Overview] FAQs on New Fiduciary Rule Issued
"Discretionary 'level fee' advisers will be required to comply with the 'streamlined' BICE requirements in connection with any rollover recommendation ... Firms may charge higher fees for complex products that require, for example, greater due diligence, training and closer supervision, but will need to justify the basis for the increased costs and monitor recommendations between categories.... Variable back-end awards, bonuses and similar back-end incentives are not permitted under the BICE and cannot be offered on or after October 27, 2016 (the date the FAQs were issued)." (Warner Norcross & Judd LLP)
[Guidance Overview] DOL Issues First Guidance on Fiduciary Rule
"The FAQs address a number of important topics: ... Scope of BIC Exemption ... What Constitutes Unreasonable Compensation? ... Incentive Compensation for FAs ... Recruitment Bonuses ... Level Fee Fiduciaries ... Bank Networking Arrangements ... Effective Date." (Morrison & Foerster LLP, via Lexology)
From EBSA Secretary Phyllis Borzi: Your Conflicts of Interest Questions Answered
"Earlier this year, we announced new protections to ensure that Americans who are saving for retirement will have access to financial advice in their best interest.... One of the first and most important efforts on this front is the publication of FAQs based on the input we've received from the financial services industry and others. These questions are an important part of the regulatory process as they allow the department to clarify important parts of the rule, and head off misunderstandings that could lead to bad results for retirement savers, or financial services professionals.... Our initial focus has been, and remains, broad compliance with the rule." (U.S. Department of Labor [DOL] Blog)
[Official Guidance] Text of DOL FAQs on Conflict of Interest Exemptions (PDF)
24 pages. 34 Q&As, including: "Is compliance with the BIC Exemption required as a condition of executing a transaction, such as a rollover, at the direction of a client in the absence of an investment recommendation? ...Is the BIC Exemption available for advisers who act as discretionary fiduciaries to retirement plans and then provide investment advice to a participant to roll over assets to an IRA for which the adviser will provide advice? ... Is the BIC Exemption available for recommendations to roll over assets to an IRA to be managed on a going- forward basis by a discretionary investment manager? ... Is 'robo-advice' covered by the BIC Exemption or other exemption? ... Does the full BIC Exemption prohibit a financial institution or adviser from discounting prices paid by customers for services? ... Under the BIC Exemption, who are 'level fee fiduciaries' and what prohibited transaction relief is available to them? ... Can an adviser and financial institution rely on the level fee provisions of the BIC Exemption for investment advice to roll over from an existing plan to an IRA if the adviser does not have reliable information about the existing plan's expenses and features? ... Can a financial institution and adviser rely on the level fee provisions in the BIC Exemption to recommend a rollover from an employee benefit plan to an IRA if the adviser will become a discretionary manager with respect to the IRA assets after the rollover? ... Can insurance companies rely on independent insurance agents to sell fixed rate and fixed indexed annuities to retirement investors after the applicability date of the Rule? ... What is the role of insurance intermediaries, such as independent marketing organizations (IMOs), in the sale of annuity contracts to retirement investors after the applicability date of the Rule? Can they receive compensation such as commissions and override payments? ...Is there a way to get an exemption for advice to engage in principal transactions involving assets that are not specifically covered by the Principal Transactions Exemption? ... Does PTE 84- 24 cover rollovers into an annuity? ... The wording of PTE 84-24's reasonable compensation standard differs from the reasonable compensation standard used in the BIC Exemption. Does the Department intend to interpret them differently? ... How will the Department approach implementation of the new rule and exemptions during the period when financial institutions and advisers are coming into compliance?" (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
[Guidance Overview] Reasonableness Prevails: New IRS Procedure Allows Self-Certification for Late Rollovers
"[A] plan administrator or an IRA trustee may not rely on the self-certification ... if the administrator has actual knowledge that the information in the self-certification is not true.... [T]he IRS has not elaborated on what constitutes 'actual knowledge' that the self-certification is not true, or how a plan administrator would obtain or rely on such information. This could require the implementation of a new administrative process or monitoring by plan administrators." (Trucker Huss)
[Guidance Overview] IRS Allows Self-Certification for Late Rollover Contributions
"Retirement plan administrators may accept late rollover contributions from taxpayers who self-certify that they qualify for a waiver of the 60-day rule. Plan sponsors may need to update their communications about rollovers to reflect the new IRS waiver procedures. The self-certification applies only to the 60-day requirement, not to other requirements for a valid rollover." (Willis Towers Watson)
Interesting Angles on the DOL's Fiduciary Rule, Part 22
"Based on the wording of the new fiduciary rule, if a bank employee recommends that an IRA invest in a certificate of deposit, and is compensated directly or indirectly for that recommendation, it is a fiduciary act for compensation. (The bonus, or bonus credit, is the compensation.) Since the bank employee is being paid compensation that is not stated and level, the payment is a prohibited transaction." (
DOL Rule Could Reduce IRA Rollovers
"Nearly half of projected [IRA] rollover assets are 'at-risk' of remaining in the defined contribution plan-sponsor market once the [DOL's] fiduciary rule goes into effect, a new report claims. Assets that don't roll over into retail IRA accounts, a transaction considered a big cross-selling opportunity for retirement advisors, would cut into revenues generated by financial advisors since fewer dollars are 'in motion.' +" (
Why You Should Roll Your 401(k) to Your New Employer
"Many 401(k) plans offer participants access to institutional share class mutual funds and very low cost index funds, especially those sponsored by large employers.... Balances in retirement plans, such as 401(ks), are protected against civil judgments and bankruptcy.... [D]epending on where you live, your state may not extend that protection to IRAs.... Many 401(k) plans permit participants to borrow from their plan assets at a very low rate of interest." (Financial Finesse)
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