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Retirement NewsRetirement Plan Advisors Are In DOL Crosshairs, Experts Say | #retirement | #elderly | #seniors

Retirement Plan Advisors Are In DOL Crosshairs, Experts Say | #retirement | #elderly | #seniors

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Advisors who work with ERISA plans or recommend rollovers are prime targets for scrutiny from the U.S. Department of Labor this year, attorneys and former DOL regulators said during a panel discussion yesterday.


Advisors will clearly be in the agency’s sites given that every rollover from a qualified plan is now under the agency’s jurisdiction, as stipulated in the agency’s new guidance on prohibited transaction exemptions regulation (PTE 2020), said Bradford Campbell, former U.S. assistant secretary of labor for employee benefits and now a Faegre Drinker partner. 


Advisors who are investigated may end up paying a 20% penalty or having to make unnecessary disciplinary disclosures to clients if they pursue the wrong path to settlement, attorneys said. That’s just one of many financial and reputational risks advisors run when dealing with DOL investigators.


“Under ERISA, if you settle a matter with DOL that involves putting money back into a plan, the DOL has the authority to assert a 20% penalty,” a partner at Faegre Drinker and former DOL investigator Joshua Waldbeser said.


“We work to create resolutions without formal settlements. There is the ability to negotiate the 20% that down … but with voluntary compliance there is no settlement or penalty. We negotiate a correction with DOL that is usually minimal to both sides, he said, adding that it is usually a voluntary agreement “so everyone can go on their merry way.”


The hot topics for DOL investigators are fees, conflicts of interest, use of proprietary investments, execution through affiliated brokers and rollovers from retirement plans that do not appear to be in the best interest of clients, attorneys on the panel said.


“The gray area that is going to continue to arise for advisors is with rollovers. DOL has said they represent fiduciary advice,” Campbell said.


Another trap is believing that what is permissible under SEC rules is permissible under ERISA standards. “You can run into something where SEC examiners find something permissible under SEC rules but refer the RIA to DOL investigators to see if it’s permissible,” Gutwein warned.


“I have had cases that began with a plan sponsor. DOL investigators found something amiss and began looking at every fiduciary involved with the plan to see if there was co-fiduciary liability. If DOL perceives a loss, they are interested in making client whole. If the company that caused the loss doesn’t have enough assets or insurance to make the client whole, you should expect DOL to look elsewhere,” Gutwein added.


Gutwein and other attorneys underscored the need for advisors to choose clients wisely because of the potential for pass-through liability for advisors. “Nothing will get you into a mess more quickly than a client that is a mess,” he said.

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