DOL – What it does/doesn’t cover?
The DOL regulations DO cover:
- Any recommendations regarding QUALIFIED PLAN funds
- IRA’s (even Roth IRA’s)
- 401k’s, 403b’s, 457’s, TSP’s, SEP’s, etc.
- The age of the client does not matter. All ages apply.
- Insurance-only licensed agents & any registered advisor
The DOL regulations DO NOT cover:
- Any recommendations regarding NON QUALIFIED funds
- Life Insurance (unless funded with qualified dollars)
- NQ annuities, NQ savings, NQ c.d.’s, etc.
DOL – Regulations Overview
The DOL’s interim fiduciary rules will become effective starting Friday, June 9th.
- These rules will remain until January 1st, 2018.
- Effective January 1st, 2018, the permanent rules will go into effect.
- In the interim, the DOL will be assessing whether the permanent rules will hinder a consumer’s ability to access affordable and sound retirement investment advice, and if so, to identify potential changes to the permanent rules to address any hindrances.
- Many experts predict that the permanent rules that go into effect on 1/1/18 will look very different than they do today.
- Wealthmark believes that the permanent rules as they stand today will create severe hardship on consumers trying to find retirement advice and solutions, and that they should be changed or completely eliminated.
During this interim period (6/9/17 – 1/1/18), any producer (agent or advisor) making a “purchase recommendation using Qualified funds will be subject to the Impartial Conduct Standard. This standard has three requirements:
- Must act in client’s best interest, which requires that fiduciary duties of prudence, diligence and loyalty be observed.
- Cannot make any misleading statements.
- Can receive only up to reasonable compensation.
- It is important that a producer be able to prove that they conducted a sales transaction in accordance with the Impartial Conduct Standards. This requires:
- A thorough, well-documented process which shows that relevant information was collected, analyzed, and otherwise used to formulate a best interest recommendation.
- Such records MUST be kept for at least 6 years.
Additional requirements during the interim:
- Producer MUST provide a Prohibited Transactions Exemption (PTE 84-24) Disclosure & Acknowledgement Form to the applicant, disclosing:
- The nature of the agency relationship the producer has with the company whose product they are selling.
- The compensation which the producer will receive for the transaction.
- Surrender charges and any other fees associated with the new contract.
- Any conflicts of interest the producer may have in proposing the purchase.
- Producer MUST have the client sign the PTE 84-24 to acknowledge receipt, give the client a signed copy, and retain a signed copy in the client’s file for 6 years.
- At this time, none of our Carriers are requiring that a copy of the signed PTE 84-24 be submitted with an application.
Some (but not all) of our Carriers are requiring:
- A Carrier-specific submission of a “Producer Impartial Conduct Standards Certification Form”. This form simply identifies that the funds were Qualified, and acknowledges that a PTE 84-24 was used.
- Many Carriers are updating their suitability forms
- Check with your Wealthmark Marketing staff for Carrier specific requirements.