Industry agencies, like the National Association of Plan Advisors, argued that the original language would place retirement plan advisors at a disadvantage to advisors that had no previous relationship with plan participants, and that advisors would have been effectively penalized for advising a client to roll over.
In their new form, the rules still appear to prohibit the practice of rolling 401(k) and other defined contribution plan funds into high-cost annuities or IRAs with large allocations to products with outsized commissions and fees.
Along with the revised rollover provision, the final version of the DOL’s rule also eliminates a list of investments that would qualify for the best interest contract exemption, which opens the door for non-traded REITs and business development companies to be included in IRAs.
“Any investment is appropriate for RIAs to recommend as long as it is in the best interest for the client,” says Matt Sommer, vice president and director of retirement strategies at Denver-based Janus Capital. “Rather than just prescribing a list, it opens up IRAs to different sorts of investments and investment vehicles and allows the end client to make a determination.”
Steve Dudash, president of Chicago-based IHT Wealth Management, says that the rollover rules—both in their current and original forms—provide important consumer protections.
“The unfortunate fact is that there are advisors out there who have made their entire living rolling over people’s 401(k) assets and plunking it all down into annuities,” says Dudash. “Many of these advisors don’t even know how to open accounts that aren’t related to annuities. This new rule will absolutely change the landscape in a positive way in the coming months as practices such as these will become obsolete.”