| In our DOL communications ESI has discussed the work we are doing to ensure adherence to disclosure and notification requirements set forth as part of the SEC regulation Best interest, as well as the Department of Labor rules governing retirement plans and Individual Retirement Accounts. ESI has updated three forms for use when representatives are making a Recommendation to a client to rollover their retirement plan to an IRA, and when recommending the purchase of an Annuity. The forms are titled:The Defined Benefit Recommendation formThe Defined Contribution Recommendation formThe Annuity Purchase and Exchange Disclosure.You may already be familiar with these forms since they are currently in use. However, recent updates to the regulations have resulted in updates to the disclosures and information provided on these three forms IF making a recommendation (vs education) to rollover from Qualified Plan to an IRA. This DOL spotlight is designed to make you both aware of the updates to the forms, as well as provide guidance on how to complete the newly added sections of the Defined Contribution and Benefit Recommendation and the Annuity Purchase and Disclosure Forms. |
| Transition Period May 9th – June 29thThe newly updated forms are available starting May 9th, in both Merrill as well as Docupace. ESI is launching the forms weeks in advance of the requirement date, to provide time to learn how best to complete these forms when making a recommendation to rollover plan assets. Pay special attention to the new sections of these forms which are now requiring more detailed documentation regarding the rationale for the recommendation as well as a cost comparison if the rollover is from a 401K plan. ESI strongly encourages representatives to become familiar with how to complete the new sections of these forms, IF recommending (vs educating) a rollover. This will help to ensure new business is not delayed due to incomplete or missing information.    New Section on the Annuity Purchase and Exchange DisclosureFrequently Asked QuestionsWhen are these forms required?The defined Benefit or defined contribution RECOMMENDATION forms are used when RECOMMENDING (vs educating) a client rollover their assets out of their plan into an IRA, and the IRA will purchase any product other than an Annuity. The Annuity Purchase and Exchange Disclosure Form is always required when an annuity is being purchased, however the new section V on page 5 , is only required to be completed when a recommendation is made to rollover from a 401k plan. These forms are not new; what are the updates to the form?In summary, the forms have been updated to document rationale for recommending the client leave their current plan as well as rationale for the account type being recommended. In addition, a cost comparison analysis between their current plan and the product/service recommended has been added. Is the Best Interest Supplemental Worksheet required as well?If you are using one of the above-mentioned rollover recommendation forms, you do NOT need the Best Interest Supplemental Worksheet, as the information provided is redundant. However, it is always required for annuity purchases regardless of the funding source. How do I know the costs associated with their current plan?You will need to request a copy of the plan’s participant fee disclosure document which is called the 404(a)(5). This document will provide the detail needed to complete the form. When is the deadline for using the new forms?The new forms will be available and generated in Docupace starting May 9th but are not REQUIRED by regulation until June 30th. Forms that have been signed May 8th and earlier will be accepted through May 31st. Can I continue to submit the current version until June 29th?ESI encourages use of the new forms right away. Doing so will give you time to better understand how to complete the new sections and if an error is made, it can be corrected. However, starting June 1st , the new versions of all forms must be used regardless of when they were signed. Beginning, June 30th, if an error is made on the form, it is outdated, or it is missing, the business may need to be rejected per the regulation since disclosure must occur pre-transaction. The Operations Team may send reminder emails and/or call to remind reps of the upcoming changes while in the transition period. What if I cannot get a copy of the 404(a)(5)?ESI has created a reference chart which will be posted on the National Life Agent Portal under the ESI Tools section, which gives you the estimated cost data.  |
Reminder! DOL education and training is available on the National Life Portal. Simply click on the lighting bolt located in the upper right side of the main menu bar and scroll down to DOL Training Page.
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