3987 / When does the DOL investment advice fiduciary PTE 2020-02 apply to rollover transactions?

In the finalized fiduciary release, the DOL was clear that one-time recommendations (including rollovers and annuity sales) can create fiduciary liability under the 2024 definition of investment advice fiduciary. The DOL has stated that under the old five-part test, investment advice “provided on a "one-time" basis, like many recommendations to roll retirement savings out of a workplace retirement plan and into an IRA, was typically not treated as fiduciary advice and therefore was not protected by ERISA's fiduciary safeguards. Yet, one-time advice is often the most important advice the retirement investor will ever receive…. The new rule and exemptions close the loopholes that defeat legitimate investor expectations by holding trusted advisers to a fiduciary standard. When an individualized recommendation comes from an investment professional holding themselves out as someone who is acting in the investor's best interest, it is only right that the advice meet a fiduciary standard.”

The DOL exemption for fiduciary advice specifically applies to rollover advice, assuming the circumstances qualify under the test for determining whether the advisor is an investment advice fiduciary (<em>see </em>Q 3986). Rollovers from a 401(k) to an IRA, IRA to IRA, or one type of account to another (i.e., from a fee-based account to a commission-based account) are all potentially covered by the exemption.

Under the 1975 five-part test, which now no longer applies, the DOL commentary included with the exemption stated that not every rollover triggered investment advice fiduciary status. A facts-and-circumstances analysis was required in every case to determine whether the transaction was subject to the new standard. Specifically, the DOL noted that it did not intend to apply the guidance in DOL Advisory Opinion 2005-23A (the <em>Deseret</em> Letter), which would have found that rollover advice generally does not constitute investment advice.