Beginning February 16, 2021, the provisions of the DOL’s new Fiduciary
Rule became effective, including the expanded definition of fiduciary and
Impartial Conduct Standards under new and amended prohibited
transaction exemptions. The DOL provided a non-enforcement grace
period that will expire on February 1, 2022.
This Rule represents the most significant change to retirement investment
services since the enactment of Employee Retirement Income Security Act
(ERISA) and will have a profound impact on how financial institutions and
professionals provide services to retail retirement investors, including IRAs
and IRA owners. This course provides an overview of the DOL’s Fiduciary
Rule and the responsibilities under the Rule.
Fiduciary Status
The DOL’s Fiduciary Rule prevents parties providing fiduciary investment advice from
collecting compensation or other payments for such advice unless they comply with
an exemption to the rule, called Prohibited Transaction Exemption (“PTE”).
• A person is considered to be giving fiduciary investment advice if they:
1. Make recommendations as to the advisability of investing in, purchasing, or
selling securities or other property;
2. On a regular basis;
3. Pursuant to a mutual agreement, arrangement or understanding, written or
otherwise with the plan owner, plan fiduciary or IRA owner, that ;
4. The advice will serve as a primary basis for the investment decisions with
respect to the plan or IRA assets, and that;
5. The advice will be individualized based on the particular needs of the plan or
IRA.
For agents to avoid fiduciary status, agents should clearly communicate that they are
NOT fiduciaries and ensure that their actions are consistent with those statements.
Agents must maintain all records regarding fiduciary status and transactions involving
fiduciary investment advice for a minimum of 6 years.
PTE 84-24
PTE 84-24 allows agents to receive commissions for a sale of an insurance product
(including life insurance and variable, fixed indexed and fixed rate annuities) as
long as:
• The total compensation received by the agent and agent’s agency is reasonable,
• The transaction is performed in the ordinary course of business,
• The transaction is at least as favorable as an arm’s length transaction with an
unrelated party, and
• The agent discloses the following in advance of the sale, and receives the
customer’s acknowledgement, in writing, of such disclosures:
1. The agent’s relationship with the insurance company, and any limitations;
2. The Agent’s commission (as a percentage of gross annual premium
payments);
3. A description of the charges and fees;
4. Any other conflicts of interest.