Could the Department of Labor have underestimated the compliance costs that would be associated with its proposed regulation related to rollovers from employer-sponsored retirement plans?
Independent third-party expert in providing evaluations, ratings, and due diligence DALBAR Inc., thinks so, and in addition to letting the DOL know about it with a July comment letter, has now gone a step further.
Marlborough, Mass.-based DALBAR announced today that it has developed a comprehensive checklist to support the annual review of rollover recommendations required by the DOL’s new proposed fiduciary rule, “Improving Investment Advice for Workers & Retirees.”
The proposed rule would make it a fiduciary act to recommend a rollover from an employer-sponsored retirement plan, and carves out rollovers for specialized compliance with Impartial Conduct Standards.
The Proposed Exemption would apply to registered investment advisers, broker-dealers, banks, insurance companies, and their employees, agents, and representatives who are investment advice fiduciaries. It is intended to align with the SEC’s Regulation Best Interest, and to generally mirror similar principles articulated under various state law initiatives. The primary condition of the Proposed Exemption is the Impartial Conduct Standards.
“Much of the distribution guidance Americans receive today will be subject to prohibited transaction rules under ERISA when the rule is enacted,” said Cory Clark, DALBAR’s Chief Marketing Officer.
However, the rule offers an exemption, which will allow firms to continue providing such guidance, on the condition that recommendations are made subject to impartial standard of conduct and the firm undergoes a “retrospective review” with a written report.
DALBAR specifically challenged the DOL’s statement that greatly underestimates the cost of compliance, “Based on these regulatory baselines, the Department believes the compliance costs attributable to this requirement would be modest.”
DALBAR said in a statement it carefully analyzed the Proposed Regulation with respect to the retrospective review and took the further step of creating a process, comprehensive checklist and report templates that would be needed to comply with the proposed rule.
The results were part of its comment letter to the DOL, where DALBAR warns that “such a report requires new time-consuming practices for every Investment Professional and extensive new procedures and documentation for the Financial Institution.”
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
