How to comply with DOL PTE 2020-02 retrospective review requirements

As of Jul. 1, 2022, registered investment advisers (RIA) making rollover recommendations must comply with the Department of Labor (DOL) PTE 2020-02 requirements, which includes retrospective reviews. In this blog, we’ll discuss the challenges and opportunities of these new requirements and how RIA firms can better equip themselves to comply with DOL PTE 2020-02 requirements by integrating a compliance technology or software.

Leveraging automation to comply with DOL PTE 2020-02 retrospective review requirements

Rollovers from 401Ks to IRAs represent a $700 billion opportunity annually, with the average rollover amounting to around $109,000. However, with such big opportunity comes equally significant challenges, including:

• Assessing plan fees, services and client fit.
• Documenting and disclosing best interest analysis to the investor.
• The annual retrospective review process.

In fact, according to a recent poll, 48% of respondents stated the disclosure, documentation and retrospective review processes represented one of the biggest challenges when complying with the DOL’s PTE 2020-02. However, over half of respondents also stated they are conducting rollovers manually. Additionally, manually auditing rollover recommendations was proven to be the most popular methodology for conducting retrospective reviews.

Which begs the question: how can RIAs more effectively and efficiently meet the documentation, disclosing and retrospective review challenges? The answer: Compliance automation.

In order to meet the DOL requirements, firms must conduct an annual retrospective review which consists of:

1. Assessing the policy and procedure manual: Is the process accurate in comparison to what is described in manual? 
2. Meeting retrospective review requirements: Is the process “reasonably designed” to assist in detecting and ensuring compliance with impartial conduct of standards?
3. Testing and sample methodology: Testing for subjectivity, consistency and quality control.

Equipped with an integrated solution, RIA firms can more effectively comply with the requirements of the DOL PTE 2020-02 retrospective review listed above, establishing a more efficient process for compliance. With RIA in a Box’s RolloverAnalyzer, RIA firms can:

1. Eliminate manual processes by digitally comparing rollover recommendations against cost, service and fit criteria.
2. Simplify rollover plan fee assessments by inputting the client’s 404(a)5, into integrated Form 5500 and plan expense look-up tool.
3. Eliminate multiple systems by easily transitioning from the best interest rollover recommendation to disclosure and recordkeeping.