401(k) Specialist Issue 1 - 2024 - 8

401(k) FIDUCIARY FILE
DOL Proposes SECURE 2.0 Auto-Portability
Regulation
THE EMPLOYEE BENEFIT SECURITY ADMINISTRATION (EBSA) has
released proposed regulation on automatic portability transactions
under the SECURE 2.0 Act.
The proposed regulation would seek to help workers keep track of
their retirement savings accounts by reducing cash-outs when employees
switch jobs. It would implement Section 120 found in SECURE 2.0,
which allows an automatic portability provider to receive a fee when
executing an automatic portability transaction for certain distributions
into Safe Harbor IRAs, through an added exemption to Internal Revenue
Code section 4975.
According to the DOL, the proposal must meet requirements under the
statutory exemption in order to be covered. These include, among others:
* Scope of the exemption.
* Disclosures about automatic portability transactions, fees, compensation,
and services, including an acknowledgement of the automatic
portability provider's fiduciary status, website requirements for the
automatic portability provider, and a requirement that disclosures be
written in a culturally and linguistically appropriate manner.
* Investments permitted in connection with automatic portability
transactions.
* Restriction on receipt or payment of third-party compensation by
an automatic portability provider in connection with an automatic
portability transaction.
* Prohibition on exculpatory provisions disclaiming or limiting liability
if an automatic portability transaction results in an improper transfer.
* Required actions to ensure that participant and beneficiary data is
current, accurate and secure.
* Limitations on the use of data related to automatic portability transactions
for any purpose other than to execute such transactions or
locate missing participants.
* Record retention requirements.
* Annual audit and corrections procedures if an auditor determines the
automatic portability provider did not comply with the requirements
of the statutory exemption and the proposed regulation.
The Notice of Proposed Rulemaking has been posted on the department's
website and published in the Federal Register with a 60-day
public comment period and instructions on how to submit comments.
More Older Participants Favor DOL Best
Interest Rule
MOST CLIENTS ARE IN FAVOR OF the latest proposed Department of
Labor (DOL) fiduciary rule.
The survey from AARP, which questioned 1,002 adults ages 50 and
older, found that 66% of participants strongly agree that when giving investment
advice to people with retirement savings, financial professionals
must give advice that is in the best interest of the account holders.
8
ISSUE 1 2024 | 401kSpecialist.com
Conversely, 24% of clients say they " somewhat agree " with the rule, while
4% " somewhat disagree " and 5% " strongly disagree. "
When asked how it would affect their likelihood of voting for a politician
in the next election, should a member of Congress try to reverse a
rule that required financial professionals to provide advice in the best
interest of clients, 66% said they would be less likely to vote for them.
On the other hand, 15% say they would be more likely to vote for the
member of Congress, while 19% say it would have no effect on their
voting likelihoods.
The strong approval for the rule stems from the fact that of those who
use financial advice, almost all expect their advisor to provide guidance
suited directly for the client and understand that they should. According
to the survey, over half (53%) of participants know that their advisor
is required to give them advice in their best interest. Moreover, 89% of
participants say they expect the advice to be given in their best interest,
compared to just 3% who say they do not.
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401(k) Specialist Issue 1 - 2024

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