I’m not a fan of abuses in the retirement plan space. I called for fee disclosures before it was vogue and I always saw abuses in the rollover space. I always felt that advisors could try to steer participants into products that would net them a higher commission.
Prohibited Transaction Exemption (PTE 2020-02) has required, concerning rollover recommendations, disclosures as to why a rollover recommendation is in the best interest of the retirement investor. This requirement applied regardless of whether the rollover was made from an ERISA-covered plan or an IRA.
The new fiduciary rule will provide that the rollover disclosure requirement is only applicable in connection with a recommendation to rollover from an ERISA-covered plan or a recommendation to invest assets following a rollover from an ERISA-covered plan. So it won’t apply in connection with a recommendation to rollover from one IRA to another. That makes sense.
The new fiduciary rule will also require that Financial Institutions document and disclose: (a) the retirement investor’s alternatives to a rollover, including leaving the money in their current retirement plan, if applicable; (b) the fees and expenses associated with both the plan and the recommended investment or account; (c) whether the plan sponsor pays for some or all of the plan’s administrative expenses; and (d) the different levels of services and investments available under the plan and the recommended investment or account.
