DOL Confirms Effective Date for Investment Advice PTE
The Department of Labor’s Employee Benefits Security Administration (EBSA) has confirmed in a news release issued today that prohibited transaction exemption (PTE) 2020-02 entitled, “Improving Investment Advice for Worker & Retirees,” will take effect as scheduled on February 16. This guidance was issued under the Trump administration, and essentially replaced a fiduciary investment advice guidance package issued under the Obama administration that was vacated—struck down—by a federal court in 2018.
The news release notes that “[t]his exemption allows for important investor protections, including a stringent ‘best interest’ standard of care for fiduciary recommendations of rollovers from ERISA-protected retirement accounts.” The news release adds that “[i]n the coming days, the agency will publish related guidance for retirement investors, employee benefit plans and investment advice providers.”
A temporary EBSA enforcement policy that has been in place since the Obama era guidance was vacated—Field Assistance Bulletin (FAB) 2018-02—will remain in place until December 20, 2021. The conditions articulated in FAB 2018-02 are these.
- Receive only reasonable compensation
- Make no misleading statements in rendering advice
- Act in the client’s best interest
Today’s news release additionally describes EBSA’s intention to “improve” not only the exemption that is about to become effective, but also previous guidance defining who is an investment advice fiduciary (includes the 1975 regulations’ five-part test) and other related exemptions.