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Fiduciary Rule Under Review – Update

February 6, 2017

Authors

Lisa Van Fleet and Steven Schaffer

Fiduciary Rule Under Review – Update

February 6, 2017

by: Lisa Van Fleet and Steven Schaffer

On Friday, President Trump issued an order directing the Department of Labor to review the new regulation to determine whether it is inconsistent with the current administration’s policies and, as it deems appropriate, to take steps to revise or rescind it.

The long awaited Fiduciary Rule expanded protection for retirement investors and included a requirement that brokers offering investment advice in the retirement space put clients’ interests first.  Financial institutions that either implemented, or were rapidly completing, their compliance efforts to comply with the Fiduciary Rule will need to assess the impact of this order on these efforts.  Notwithstanding many earlier reports that the rule would be delayed 180 days, the date on which the rule was to take effect (April 10, 2017) has not been delayed.  However, it is anticipated that a delay will be forthcoming, making the decision whether or not to proceed with further

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Using Public Policy to Create IRA Irony

October 26, 2016

Authors

benefitsbclp

Using Public Policy to Create IRA Irony

October 26, 2016

by: benefitsbclp

confusionYou might recall that the Department of Labor (DOL) took the position earlier this year that it had to protect individual retirement accounts and annuities as well as IRA owners by extending certain ERISA protections to them. In its promulgation of the amended investment advice regulation (otherwise known as the fiduciary rule) and the related prohibited transaction exemptions, it extended its reach deep into parts of the individual retirement plan structure where it had not ventured before.  (Its authority to do so is presently the subject of numerous lawsuits.)   It did so contending that public policy requires it to protect the IRAs and IRA owners from its perceived conflicts of interest emanating from the investment advisory and sales arms of financial services organizations.

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I Know My Rollover is Late, but It’s Okay. Trust Me.

September 9, 2016

Authors

Chris Rylands

I Know My Rollover is Late, but It’s Okay. Trust Me.

September 9, 2016

by: Chris Rylands

certified-with-ink-padAs retirement plan professionals know, certain distributions from plans and IRAs to taxpayers can be rolled over to another plan or IRA within 60 days. Of course, sometimes 60 days is just not enough and the IRS recognizes that, having permitted a seemingly innumerable number of private letter rulings granting extensions.  These often occur where a financial advisor gave bad advice or made some kind of mistake or where some tragedy worthy of a blues or country song (or worse) befell the taxpayer that made it impossible to complete the rollover in 60 days.

The IRS has had a small cottage industry the last decade or so of granting private letter rulings extending the 60-day period for these rollovers.  But now, they’ve decided to let plans and IRAs just take the taxpayer’s word

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Education or Advice: The DOL Final Definition of Fiduciary; Conflict of Interest Rule

April 21, 2016

Authors

Katharine Finley and benefitsbclp

Education or Advice: The DOL Final Definition of Fiduciary; Conflict of Interest Rule

April 21, 2016

by: Katharine Finley and benefitsbclp

Changes AheadEarlier this month, the Department of Labor finally released the long-awaited “Definition of Fiduciary; Conflict of Interest Rule.”

This blog post is intended to do two things:

  • Provide a brief history of the proposal, and
  • Provide an overview of the key points of the final rule and how it differs from the 2015 proposal.
  • For additional materials and information on the Final Rule, visit the DOL webpage. In addition, you can access all 200 plus pages of the final rule here.

    I.  The “Conflict of Interest” Rule’s History

    Since the adoption of ERISA, the governing regulations have mandated use of a five-part test that dictates whether an individual will be considered an investment advice fiduciary. In order to rise to the level of an investment

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    The President’s Benefits Budget Proposals

    March 2, 2016

    Authors

    Chris Rylands

    The President’s Benefits Budget Proposals

    March 2, 2016

    by: Chris Rylands

    ThinkstockPhotos-122516159A few weeks ago, the President released his proposed budget for the fiscal year 2017. As usual, it is dense. However, the President has suggested some changes to employee benefits that are worth noting. While they are unlikely to get too much traction in an election year, it is useful to keep them in mind as various bills wind their way through Congress to see what the President might support.

    • Auto-IRAs. Stop us if you’ve heard this one before. The proposal would require every employer with more than 10 employees that does not offer a retirement plan to automatically enroll workers in an IRA. No employer contribution would be required and, of course, individuals could choose not to contribute. (In case you’ve forgotten, we’ve seen this before.)
    • Tax Credits for Retirement Plans. Employers
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    Did They Do It? The Department of Labor “Clearing the Way” for State-Based Retirement Plans

    November 24, 2015

    Authors

    benefitsbclp

    Did They Do It? The Department of Labor “Clearing the Way” for State-Based Retirement Plans

    November 24, 2015

    by: benefitsbclp

    It is not news that Americans aren’t saving enough for retirement. But, what is news, is that this Administration seems to be bent on making some meaningful change on that front with the enactment of one particular solution – state-based retirement plans. After hearing the marching orders of the President to clear the path for state-based retirement savings initiatives (including legislation that automatically enrolls employees in IRAs), the Department of Labor has declared VICTORY!

    But let’s take a closer look. What did the Department actually do? And will it withstand public commentary, let alone judicial scrutiny?

    Last week, the Department issued two pieces of guidance: an Interpretive Bulletin and a Proposed Regulation. Each attempts to tackle a different element of the state-based IRA arena:

  • ERISA-Covered Plans, But No Preemption?
  • Performing a little fancy footwork, the Department issued an “Interpretive Bulletin” (which is, in effect, an interpretation

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    You’ll Need Your BIC® for This BIC

    May 7, 2015

    Authors

    benefitsbclp

    You’ll Need Your BIC® for This BIC

    May 7, 2015

    by: benefitsbclp

    Signing a ContractThe Department of Labor (“DOL“) has responded to the concerns of the broker-dealer community as expressed in myriad comment letters concerning the 2010 proposed fiduciary regulations by adding the Best Interest Contract (BIC) exemption to the new proposed rule. The DOL suggests that this addition will minimize compliance costs and allow firms to set their own compensation structures (meaning commission-based fees, revenue sharing, 12b-1 fees and subTA fees) while acting in their client’s best interest. This exemption will be available when advising IRA owners, plan participants and small plans.

    Here’s the catch that has drawn a mostly negative reaction from the broker-dealer community:

    First: The BIC will be a formal contract committing the advisor and her firm to act with the care, skill, prudence and diligence that a prudent

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    DOL’s Expansion of the Definition of Investment Advice (or “Fiduciary”)

    April 17, 2015

    Authors

    Lisa Van Fleet

    DOL’s Expansion of the Definition of Investment Advice (or “Fiduciary”)

    April 17, 2015

    by: Lisa Van Fleet

    Who's Holding Your Piggy Bank?Acting on reaction to a proposed and subsequently withdrawn regulation from October 2010 and attempting to address concerns expressed by both interested parties to the initial proposed regulation and an economic analysis by the Council of Economic Advisors (that the Investment Company Institute considers flawed), the Department of Labor has issued a new proposed regulation expanding the definition of investment advice. The DOL’s stated purpose in doing so is to protect retirement plan and IRA investors from practices engaged in by some advisors whose interest in providing investment advice is conflicted and not in the best interest of the participant or IRA owner.

    The proposed rule does not expand the definition of fiduciary per se, but instead it expands the areas of advice that are rendered by

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    U.S. Supreme Court: Inherited IRAs Are Not Exempt from Bankruptcy Estate

    June 24, 2014

    Authors

    benefitsbclp

    U.S. Supreme Court: Inherited IRAs Are Not Exempt from Bankruptcy Estate

    June 24, 2014

    by: benefitsbclp

    Retirement Fund JarThe Bankruptcy Code allows debtors to exempt from their bankruptcy estate certain “retirement funds”, including amounts held in an individual retirement account (IRA) or Roth IRA.  The Code is silent, however, on whether amounts held in an inherited IRA are subject to creditors’ claims in bankruptcy.  The U.S. Supreme Court resolved that issue recently in Clarke v. Rameker, holding that funds held in inherited IRA accounts are not exempt from creditors’ claims.

    The debtor in this case inherited her mother’s IRA and was receiving periodic distributions from the account.  At the time of the debtor’s bankruptcy filing, the inherited IRA had just over $300,000 left in it.  The debtor claimed that the exemption under the Bankruptcy Code for “retirement funds” covered her inherited IRA.  Her creditors challenged this

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    IRA Rollovers – One Really Does Mean One Now

    March 28, 2014

    Authors

    benefitsbclp

    IRA Rollovers – One Really Does Mean One Now

    March 28, 2014

    by: benefitsbclp

    You are entitled to make one tax-free rollover from one individual retirement account or individual retirement annuity (“IRA”) into another IRA in any 1-year period, not one rollover into each separate IRA you own.  This is a new interpretation by the Tax Court and IRS.

    Section 408(d)(3)(B) of the Internal Revenue Code limits rollovers from one IRA into another IRA to one in any 1-year period.  As provided in Proposed Treasury Regulation Section 1.408-4(b)(4)(ii), the IRS interprets this statutory limitation as applying separately to each IRA.  In the current version of IRS Publication 590, the IRS provides the following example:

    Example. You have two traditional IRAs, IRA-1 and IRA-2. You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). You cannot, within 1 year of the distribution from IRA-1, make a tax-free rollover of any distribution from either IRA-1 or IRA-3 into another traditional

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