Posted on December 15, 2020

WASHINGTON, D.C. -- The U.S. Department of Labor (DOL) today issued a final rule governing investment advice for retirement plans covered under the Employee Retirement Income Security Act of 1974 (ERISA). The Insured Retirement Institute (IRI) and its members are carefully reviewing the nearly 300-page rule to fully understand its implications.

“The rule contains several positive changes that can help to ensure consumers will continue to access the financial products and services they need to achieve retirement goals,” said Jason Berkowitz, IRI Chief Legal and Regulatory Affairs Officer. “We appreciate that the final exemption in the rule aligns with a best interest standard similar to the U.S. Securities and Exchange Commission’s Regulation Best Interest and the National Association of Insurance Commissioner’s model best interest regulation that states have begun to adopt.”

IRI has long supported a clear, consistent, and workable best interest standard that provides meaningful and effective consumer protections without depriving consumers of access to valuable financial products and services.

IRI said it was encouraged by several positive changes made to the conditions of the prohibited transaction exemption. The final rule includes an adjustment to record-keeping requirements to allow only the DOL and the Treasury Department to obtain access to a financial institution’s records.

Another change from the original proposal allows a senior executive officer to sign a retrospective compliance review instead of the chief operating officer.

A third change extends the exemption to allow financial institutions to engage in principal transactions with retirement plans and Individual Retirement Accounts (IRA) in which the financial institution purchases or sells certain investments from its own account.

IRI also agrees with the provisions included in the proposed rule and remained in the final version that places enforcement authority with DOL regulators and not through a private right of action.

“IRI will be closely examining the discussion of the five-part test in the final rule’s preamble,” Berkowitz said. “The preamble to the proposal would have significantly altered the interpretation of that test in a way that would have impaired consumer access and choice with respect to financial advice. The final exemption appears to take a less harmful approach, but further analysis is needed to ascertain its true impact.”

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Contact: Dan Zielinski