DOL Rollover Guidance Is Not Dead, Lawyer Warns

What the Florida Ruling Means

At issue in ASA’s case was the “regular basis” prong of ERISA’s five-part test on when investment advice is fiduciary advice.

As the law firm Dechert explains in a recent alert, it is the “regular basis” prong “with which the ASA Decision is concerned, with the court ‘vacate[ing] the policy … that interprets ‘regular basis’ to include IRA rollovers.”

In the Florida case, Campbell said on the webcast, the American Securities Association “asked for several different aspects of DOL’s guidance to be vacated; the court agreed really with the one key one, but it’s a big deal.”

The court said that “DOL’s reinterpretation of ‘regular basis’ is inconsistent with the law. … The court is saying ERISA applies to investment advice to a plan, and investment advice as they’ve [DOL] defined it for this ‘regular basis’ test would include advice after the rollover to the individual once they’re in their IRA.”

However, the court “said effectively an IRA is not a plan, and therefore you can’t say that it’s a regular basis because if advice was provided once when the assets were in the plan, and then multiple times thereafter when assets were now in an IRA.”

That “key part of DOL’s guidance that applies to rollover recommendations is vacated,” Campbell relayed.

Bottom line, according to Campbell: In light of the Florida court decision, “I wouldn’t run out and change my policies and procedures right now, but I would keep an eye on it as it goes forward.”

Fred Reish, partner at Faegre Drinker, agreed on the webcast that he’d “be pretty cautious about saying ‘Hey, this is all over’ based on this [Florida] court decision. That is just a first step in a long process.”

Further, Reish reiterated that Labor is working on a new fiduciary definition rule, which he said may be sent to the Office of Management and Budget in April or May.