DOL Fiduciary Rule PTE 2020-02

[DHK]

Ohio National just sent this email out:

Deadline approaching for Department of Labor Fiduciary Rule

As previously communicated, on Feb. 16, 2021, a new Prohibited Transaction Exemption (“PTE”), PTE 2020-02, published by the U.S. Department of Labor (DOL) became effective.

Within the preamble to the new PTE, the DOL has changed its position on how the “Five-Part Fiduciary Test” will be applied. The “Five-Part Fiduciary Test” is used to determine whether a sales representative or any other person is acting as a fiduciary with respect to qualified plans. It states that a person who is not otherwise a fiduciary is deemed to render fiduciary investment advice with respect to a plan (including an IRA) under ERISA, if such person:

1. renders advice as to the value of securities or other property, or makes recommendations as to the advisability of investing in, purchasing or selling securities or other property,
2. on a regular basis,
3. pursuant to a mutual agreement, arrangement or understanding with the plan, plan fiduciary or IRA owner, that
4. the advice will serve as a primary basis for investment decisions with respect to plan or IRA assets, and that
5. the advice will be individualized based on the particular needs of the plan or IRA.

In addition, it is now the DOL’s position that rollover recommendations can be fiduciary in nature if all five prongs of the five-part test are met, which is a reversal of their previous position. Under this new guidance, sales representatives, including those who are not registered to sell securities, are now more likely to be acting in a fiduciary capacity when rolling over qualified funds into an insurance or annuity product.

For insurance and annuity sales which fall under this five-part test, including rollover recommendations, you will need to satisfy the requirements of a PTE in order to receive compensation. The enforcement relief that was previously extended by the DOL will end on Jan. 31, 2022.

To remain compliant, you will need to rely on an existing exemption, such as PTE 84-24, which, among other requirements, requires disclosures regarding compensation. If you are a registered representative affiliated with a financial institution, you may also be able to rely on the new PTE 2020-02. For registered representatives affiliated with ONESCO, please find additional information here.

The Ohio National Life Insurance Company and Ohio National Life Assurance Corporation are not financial institutions for purposes of PTE 2020-02. For those who are not registered to sell securities, compliance with these rules and the requirements of PTE 84-24 are your responsibility. However, we will continue to update you with any developments or changes that are announced.

Template PTE 84-24 disclosure forms will be made available here which you can use when selling Ohio National annuity products. This form discloses to the customer that you are acting as a fiduciary and the commission that you will be paid. You can find your commission rates on your compensation schedule on ON-Net under Contract & Benefits > Compensation > Compensation Schedule. This documentation should not be sent to Ohio National; rather, you should keep it for your records. To comply with PTE 84-24’s document retention requirements, you should keep completed forms for six years.

Thank you for your business and your attention to this matter.

Now, read it again, and instead of reading it as though it came from Ohio National... put in either YOUR company or EVERY insurance company.

"[INSERT company here] are NOT financial institutions for purposes of PTE 2020-02."

Whether you're acting as a fiduciary regarding qualified plans (including IRAs) will be determined by those 5 criteria above.

Based on this, I am a fiduciary. Now, I have absolutely no problem with that. (I also happen to be an IAR with an RIA as well as have several designations (CLU, ChFC, and RFC). Fiduciary advice is, at a minimum, IMPLIED for me.)

If you have questions, check with your respective companies (of course). I would also HIGHLY recommend that you pick up John Olsen, CLU, ChFC, AEP's book and follow it.

Amazon product ASIN B09QHD7M9K

 

[DHK]

Here are the forms Ohio National made available for their annuity sales:

FIA with trails
FIA no trails
and SPIAs

***

Of course, with this new era of disclosure, I'm happy to disclose my compensation... while I also show the fees and taxes that the client WON'T have to pay by following the total plan I create for them over a 10 and 20 year period.

 

[DHK]

Of course, and this group knows this, just because we're a fiduciary, doesn't mean that we can give securities advice without the proper licensing and registrations.