Page 32 - Investment Advisor December 2022/January 2023

COVER STORY

they would also be required to take RMDs for years 1–9 after around much longer, making Secure Act 2.0 legislation a bipar-
death,” Slott noted. “No one saw that coming, so many of these tisan priority. House Ways and Means Committee Chairman
affected beneficiaries did not know to take these RMDs, and Richard Neal, D-Mass., “won’t be chairman of Ways and
there [was] a 50% penalty for not taking RMDs,” he added. Means next year,” ERISA attorney Brad Campbell, former
The IRS provided relief by saying “that the 50% penalty will not head of the Labor Department’s Employee Benefits Security
apply to these beneficiaries for 2021 and 2022, which essentially Administration, said during a webcast, and Rep. Kevin Brady,
means that these RMDs do not have to be taken at all — a free R-Texas, ranking member on the committee, is retiring.
pass,” Slott stated. “This relief only applies to these affected ben- Also retiring is Sen. Rob Portman, R-Ohio, who jointly
eficiaries.” In a previous interview, Slott said he hoped Congress penned the Retirement Security and Savings Act of 2021 with
would fix the 10-year rule issue in the Secure Act 2.0 package. Sen. Ben Cardin, D-Md.

Political watchers agree that Secure Act 2.0 retirement legisla- Compliance with the Securities and Exchange Commission’s
tion will pass during the lame-duck session of Congress. Mike new Marketing Rule became mandatory on Nov. 4. As the
Townsend, Charles Schwab’s Managing director of legislative deadline approached, firms were in various stages of compli-
and regulatory affairs, said at Schwab’s annual conference in ance. The SEC’s advertising and marketing rule has been in
early November that Secure Act 2.0 will likely pass this year. effect since May 2021.
Congress comes back the week of Nov. 14 and will be back Bill Simpson, compliance princi-
for a few weeks during the lame-duck session, Townsend said. pal at Hearsay Systems, anticipates
“I wouldn’t be surprised if it [Secure Act 2.0] passed in mid- that the SEC “will likely be heavy-
December” by being attached to a must-pass spending bill. handed in its disciplinary actions
Lawmakers are pushing for passage of the sweeping retire- for firms that are not in compli-
ment bill. On Oct. 25, The Hill published an ance,” as firms have had “rough-
op-ed by Sens. Rob Portman, R-Ohio, ly two years to comply.”
and Ben Cardin, D-Md., titled “Now On Sept. 19, the SEC announced
Is the Time to Get Bipartisan in a Risk Alert that it would focus
Retirement Reform Done.” on compliance with the Marketing
The two lawmakers champi- Rule in its 2023 exam schedule.
oned their Retirement Security Simpson said that the agency’s handling of marketing rule
and Savings Act, which they said compliance will likely be reminiscent of the string of fines
“includes dozens of provisions associated with Form CRS, “where the SEC clearly expected
to help improve retirement secu- firms to comply and gave them ample time to do so.”
rity for all Americans.” Most of the bill So far, the SEC has hit 42 firms with penalties for not com-
was included in the Enhancing American plying with agency requirements pertaining to the Customer
Retirement Now (EARN) Act, which was unanimously passed Relationship Summary form. “We expect a similar fact pat-
by the Senate Finance Committee in June, the lawmakers noted. tern to emerge in 2023” related to the new Marketing Rule,
The Senate Finance Committee released the final text of Simpson said.
the EARN Act on Sept. 8. The EARN Act will be part of the “The rule is creating a tremendous amount of work for
Senate’s Secure 2.0 package, which must be reconciled with compliance teams,” Simpson said. “Not only is the regulatory
the House version. change itself onerous — as policies and procedures need to be
The House passed its version of Secure Act 2.0 — officially reviewed and updated — but the implications of the rule will
called the Securing a Strong Retirement Act of 2022 — in March. increase volumes as well.”
The lame-duck session will be “jammed packed with the With a broader definition of “advertisement,” Simpson con-
National Defense Authorization, marriage equality, the 2023 tinued, “firms will be required to apply a higher standard of
budget, Secure Act 2.0 and more,” notes Jeff Bush of The review to more communications. Additionally, permitting tes-
Washington Update. timonials represents a massive increase in supervision require-
A spokesperson for the Insured Retirement Institute told ments, especially for large firms with thousands of advisors.
IA: “We understand that House and Senate staff are commu- Manually addressing these factors for tens of thousands of
nicating [about Secure Act 2.0 legislation] but we do not expect advisors will be impossible; firms must leverage technology to
any significant movement” until after the midterm election. scale and automate their supervision processes.”
IRI, the spokesperson said, “remains optimistic that Ken Joseph, managing director and head of the Financial
Congress will pass Secure 2.0 by the end of the year.” Services Compliance and Regulation practice for the Americas
Key champions of the huge retirement bill will not be at Kroll, said that as the deadline neared, “questions abound”

30 INVESTMENT ADVISOR DECEMBER 2022/JANUARY 2023 | ThinkAdvisor.com