Fred Reish Discusses DOL’s Notice of Appeal in 401(k) Rollover Ruling With ThinkAdvisor and NAPA

Benefits and executive compensation partner Fred Reish spoke to ThinkAdvisor and the National Association of Plan Advisors (NAPA) about the Department of Labor (DOL) filing its notice of appeal of a ruling that struck down its guidance pertaining to a fiduciary duty regarding rollovers.

ThinkAdvisor turned to Reish for insight on how the federal court decision in Florida striking down the DOL’s guidance that declared rollover advice fiduciary advice “will force the DOL’s hand” in releasing a new fiduciary definition rule, likely by the end of summer, Reish predicted. He also noted that the move was expected.

“As a result, broker-dealers, investment advisers and insurance agents are left with uncertain outcomes for rollover recommendations,” Reish stated. “If they do not continue to satisfy the requirements of the DOL’s prohibited transaction exemption (PTE) 2020-02 for rollover recommendations, they are at risk that the DOL will win the appeal, and any recommended rollovers will be prohibited transactions. We will likely remain in this regulatory limbo for a year or more.”

Reish said he also expects the DOL to release a proposal soon “to toughen the DOL’s PTE 84-24 for recommendations of annuities for rollovers.” With this plan, the DOL “will require more of both the insurance agents and the insurance companies.” Further, Reish answered questions about how firms are complying with DOL’s fiduciary PTE.

In the NAPA article, Reish explained, “While the DOL won on the question of whether the procedure outlined in FAQ 15 was appropriate, they lost on the bigger issue of the re-interpretation of the fiduciary rule for rollovers.” He continued, “If an adviser or agent isn’t a fiduciary, then a rollover recommendation won’t be a prohibited transaction, and PTE 2020-02 and the FAQ 15 process won’t be needed.”