Editor’s Note: This is the latest in a series of posts by speakers at the 2013 NAPA/ASPPA Summit, March 3-5, 2013 in Las Vegas. Charlie Epstein and Marcia Wagner address the question of how you can accept rollover business from a 401(k) participant — even if you’re a fiduciary advisor to the plan. Their workshop will be March 4 at 2:45 p.m.
Imagine you’re leading a participant education meeting. An employee raises her hand and says, “I’m retiring next month and I’d like you to advise me on what to do with my money from the plan.”
What do you say? Many advisors believe they are prohibited under ERISA from giving any rollover-related advice to plan participants if they carry fiduciary status at the plan level. So you may say something like, “I’m sorry, but I can’t help you. I’m prohibited by the DOL from helping you in this transaction because I provide the plan’s investment services.”
Or maybe you wing it, because you think you’re not a fiduciary to the plan or you are not fully aware of the basis of DOL Advisory Opinion 2005-23A, more commonly known as “the DOL rollover opinion.”
The DOL rollover opinion was intended to curb potential abuses associated with cross-selling and “capturing” rollover business. Since its release in 2005, there has been tremendous confusion within the entire industry on how to handle the millions of dollars in the hands of participants who need the sage and skillful advice of a competent advisor. Oftentimes, the advisor on the plan has worked with these participants for many years, and their professional assistance is being sought at a critical stage in the participant's life.
It no longer has to be this perplexing. There’s now a solution for all advisors to deliver their full range of plan level advice and offer employee rollover services within the framework of a well-documented and formal process.
The DOL Rollover Opinion based its analysis on Varity Corp v. Howe, a Supreme Court decision with a three-factor test for determining when a person with a plan fiduciary role is acting in a non-fiduciary capacity. Based on this analysis, the prohibitions against capturing rollovers should not apply when advisors (including both deliberate and accidental fiduciaries) are offering their rollover IRA services in a non-fiduciary capacity.
We’ll explain all this at our workshop session on Monday, March 4 at 2:45. Join us to discuss this industry bypass to ERISA’s regulatory divide, which allows advisors to implement a service model to ensure that they act in a non-fiduciary capacity when offering rollover-related investment assistance.
Charlie Epstein, CLU, ChFC, AIF® is the founder of The 401k Coach® Program.
Marcia Wagner is a specialist in pension and employee benefits law, and is the principal of The Wagner Law Group.
