3 Messages for Retirement Planners in New DOL Notice – ThinkAdvisor
What You Need to Know
- The new prohibited transaction exemption updates involve elimination of references to credit ratings.
- The changes reflect Dodd-Frank revisions.
- The Labor Department notes that it is also reflecting changes made by the SEC.
The Employee Benefits Security Administration — an arm of the Department of Labor — has moved to flush references to credit rating agencies out of six sets of rules.
EBSA is preparing to publish a notice updating the rules Wednesday, in the Federal Register. The updates are set to take effect 60 days after the official Federal Register publication date.
The rules are exemptions from the Employee Retirement Income Security Act and Internal Revenue Code conflict-of-interest rules.
The exemptions help mutual fund companies, life insurers and other asset majors buy, sell and manage assets that support retirement plans and other benefit plans.
EBSA made the changes because of provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act that require the Labor Department to remove references to credit ratings from its class exemptions, and to substitute other creditworthiness standards.
Here are three takeaways from the update notice, for retirement planning specialists.
1. The change in standards for evaluating creditworthiness might not make life any easier for plan sponsors and managers.
Instead of simply holding securities with high ratings from credit rating agencies, the parties affected by the new updates must be “subject to no greater than moderate risk” and “sufficiently liquid that such securities can be sold at or near their fair market value within a reasonably short period of time.”
