Author: iralogixdev

Advances in technology and innovative IRA solutions, such as those offered by IRALOGIX, provide financial advisors with a significant opportunity: help more clients simplify and optimize their retirement portfolios with IRA rollovers. IRALOGIX’s proprietary, cloud-native solution makes consolidating and managing retirement accounts easier, more efficient, and cost-effective for both advisors and investors.

The Strategic Opportunity

Individual Retirement Accounts (IRAs) are essential tools for effective retirement planning. They can be used to accumulate tax-deferred and tax-free wealth. They also facilitate tax-free consolidation of retirement accounts, enhance investment options, and help clients better manage retirement income goals.

But many retirement savers struggle with multiple, fragmented retirement accounts, which often creates confusion and inefficiencies. The perception that consolidating funds in an IRA is too complex or costly prevents job changers and retirees from taking proactive steps toward a more streamlined financial future. Depending on account balance, many savers struggle to find the right assistance. The solution for advisors who want to help—and increase their share of the growing IRA market—lies in a straightforward yet transformative IRA rollover strategy.

Unlock the Potential

The key to a transformative IRA strategy is unlocking a range of opportunities by partnering with an IRA program that allows you to retain your clients and AUM/AMA and offer a tiered business model. Consider how many more clients you could say “yes” to with an IRA program that enables you to offer an IRA with no minimum threshold, low-cost institutional share class investments, and a digital advice engine. With the flexibility to offer an IRA rollover to any prospect with any size account balance, without adding more hours to the workday or taking time away from servicing your wealth management clients, you can open new avenues for client engagement and revenue growth. Clients benefit from each level of your services depending on their needs.

1. Avoid Common Rollover Pitfalls

Despite the advantages, rollovers can present challenges if not executed properly. Common pitfalls include premature cash-outs, misunderstanding tax implications, missing critical deadlines, and high IRA fees. Advisors can easily assist clients with the IRA search and the rollover process by offering an IRA program that allows account holders to roll over their assets and manage their IRAs through an easy-to-use, paperless platform with low cost investments.

2. Expand Investment Support Opportunities

Unlike the often-restricted choices available in employer-sponsored plans, like single fund family offerings, IRAs should offer a diverse range of investments and investment providers. This allows advisors to use IRAs to craft tailored investment portfolios for wealth management clients as well as model portfolios or managed accounts that can be used by many clients.

Modern technology platforms enhance this capability, providing tools that enable advisors to manage investment portfolios efficiently. Digital solutions that automate investment management enable advisors to scale their services while still empowering low-touch clients with personalized investment insights.

3. Maximize Tax Efficiency

IRAs also present opportunities for strategic retirement income planning. Unlike 401(k) plans, IRAs offer greater flexibility in managing Required Minimum Distributions (RMDs) and converting pre-tax savings into tax-free income for retirees and their heirs. By strategically timing rollovers, conversions, charitable giving, and withdrawals, advisors can help clients minimize tax burdens, preserve wealth, and enhance long-term returns.

Mastering the Art of IRA Rollovers

A successful IRA rollover strategy is more than just helping retirement savers move money; it’s about providing a comprehensive service that enhances their financial well-being and strengthens your firm’s position in the market.

• Select the Right IRA Platform: Look for an IRA platform that offers a variety of investment selection and management features so you can expand your IRA rollover prospects without having to modify your advisory services business model.
• Select a Favorable Fee Structure: IRA fee structures are a critical component of determining whether a rollover is in a saver’s best interests, depending on their particular needs. Consider an IRA program with low-cost investments comparable to those typically available in a retirement plan so IRA fees don’t become a deal-breaker.
• Leverage your Expertise: Enhance client satisfaction and trust by positioning your services as an indispensable resource for navigating rollovers, investments, and tax-planning. As workers and retirees seek clarity and control over their retirement savings, advisors are uniquely positioned to guide them through this transition.

Empower Your Clients, Grow Your Business

Partnering with a specialized IRA service provider, like IRALOGIX, allows you to access an IRA program on an advanced digital platform that provides the investments, fees and features retirement savers need, while enabling you to scale your business effectively. Our white-labeled platform allows firms to design and brand an IRA product that integrates with the firm’s existing systems architecture. We also provide full IRA administration, a streamlined enrollment process, access to strategic partnerships, compliance support, and customer care—all designed to enhance the client experience and optimize outcomes.

Unlock the potential of IRA rollovers to enhance and grow your revenue and service offerings. Contact IRALOGIX to learn more about how we can support you in delivering tailored rollover solutions that drive client success and business growth.

Determining when an investment professional is subject to a fiduciary standard of care for making a rollover recommendation to a retirement saver is challenging. Multiple agencies’ overlapping compliance requirements and fiduciary definitions complicate this determination. And the Department of Labor’s (DOL’s) thwarted efforts to revise its fiduciary rules leaves a trail of pockmarked guidance.

Below is an overview of the rules for brokers and advisors working with retirement savers today. Under these rules, a one-time recommendation to roll over retirement plan assets to an IRA is not fiduciary advice that requires a prohibited transaction exemption (PTE). But brokers and registered advisors providing securities recommendations must still meet the SEC’s requirements. These requirements are similar to the DOL’s PTE conditions with a few significant differences.

…a one-time recommendation to roll over retirement plan assets to an IRA is not fiduciary advice that requires a prohibited transaction exemption (PTE). But brokers and registered advisors providing securities recommendations must still meet the SEC’s requirements.

The DOL

The DOL’s latest fiduciary rule and amendments to existing PTEs are now on hold while two Texas courts determine whether to vacate these rules. Consequently, investment professionals working with retirement savers should look to the 1975 five-part test under ERISA and the Internal Revenue Code to determine what is considered fiduciary investment advice. Under this test, an investment professional will be a fiduciary if they render advice for a fee or other compensation and meet all five elements:

1. Render advice to a plan or IRA as to the value of or the advisability of investing in securities or other property;

2. The advice is on a regular basis;

3. Advice is given pursuant to a mutual agreement, arrangement, or understanding; that

4. The advice will serve as a primary basis for investment decisions with respect to the plan or IRA assets; and that

5. The advice will be individualized based on the needs of the plan or IRA.

If an investment professional meets this test (or otherwise assumes fiduciary status), they cannot engage in prohibited transactions that create conflicts of interest for themselves or their financial institution/firm. If there is a conflict of interest, such as earning commissions or other compensation that is dependent on the advice provided, the fiduciary (and their firm) must operate under a PTE.

While several PTEs are still available (pending the Texas courts’ decisions), most ERISA/Code fiduciaries will look to PTE 2020-02. The PTE’s conditions should be familiar to firms and advisors because full compliance has been required since June 30, 2022. The conditions that must be met under PTE 2020-02 have not changed from the original version. However, the DOL’s re-interpretation of the “regular basis” prong of the five-part test in the preamble to PTE 2020-02 has been vacated for one-time rollover recommendations from an ERISA retirement plan to an IRA.

The preamble to PTE 2020-02 re-interpreted “regular basis” to include a rollover recommendation to a new client if there would be an ongoing advice relationship after the rollover. The DOL reasoned that the same provider is giving advice to the same person with respect to the same assets (or proceeds of those assets), pursuant to identical five-part tests. The DOL reiterated this position in Q&A 7 of its 2021 FAQs on how to meet PTE 2020-02. But, in 2023, a Florida court vacated Q&A 7 and the applicable parts of the preamble, ruling that advice to an investor on ERISA plan assets could not be combined with advice on IRA assets to meet the “regular basis” test.

…if there is not an existing advice relationship with an ERISA plan or participant, a recommendation to roll over plan assets to an IRA will not meet the regular basis prong of the 1975 test…

As a result, if there is not an existing advice relationship with an ERISA plan or participant, a recommendation to roll over plan assets to an IRA will not meet the regular basis prong of the 1975 test, even if an advice relationship will be established with the IRA. This type of rollover recommendation is not fiduciary advice under the DOL’s rules in effect today, so the conditions of PTE 2020-20 do not need to be met.

The SEC

The SEC adopted “Regulation Best Interest” (Reg. BI), effective June 30, 2020, to create greater consistency in standards of conduct for brokers and Registered Investment Advisors (RIAs). RIAs are subject to fiduciary standards under the Investment Advisers Act of 1940. Reg BI affirms this standard for RIAs and holds brokers to a “best interest” standard when making recommendations to retail customers regarding any securities-related transaction or strategy. These rules apply when making recommendations to retirement savers, including transfer and rollover recommendations.

Comparing PTE 2020-02 and Reg. BI Requirements

Investment professionals who are subject to the SEC’s requirements must satisfy both the SEC requirements and the conditions of PTE 2020-02 (or another PTE) if providing fiduciary investment advice under ERISA or the Code and receiving conflicted compensation. The SEC’s and DOL’s compliance requirements and standards of care are similar but not the same. Both require investment professionals to put the investor’s interests ahead of their own and to compare relevant factors for the existing and recommended accounts to determine that a rollover is in the retirement saver’s best interests. However, the SEC does not require brokers to claim fiduciary status nor disclose the rollover analysis to the customer.

Agency – Rule	SEC – Reg. BI	DOL – PTE 2020-02
Applicable to	Brokers recommending securities transactions to a retail customer, including a retirement investor	Investment professionals providing nondiscretionary fiduciary advice or a fiduciary rollover recommendation to a retirement investor for conflicted compensation
Fiduciary status	N/A, but must disclose capacity in which broker is acting in the Client Relationship Summary (CRS)	Advisor & firm must acknowledge fiduciary status under ERISA &/or the Code in writing to the investor
Standard of care	Act in the best interest of the customer at the time the recommendation is made, without placing the broker or broker-dealer’s interests ahead of the customer’s interests	Adhere to Impartial Conduct Standards – Provide prudent & loyal advice in the best interest of the retirement investor – Charge only reasonable compensation – Avoid misleading statements
Financial institution compliance	Follow written policies & procedures to ensure compliance with Reg. BI & identify & eliminate or mitigate & disclose conflicts of interest	– Follow written policies & procedures to ensure compliance with Impartial Conduct standards & to mitigate conflicts of interest – Conduct annual retrospective review, with a written report certified by a senior executive officer
Disclosures	Provide written disclosures of services, fees, material conflicts of interest & material limitations on the securities that may be recommended	Provide written disclosures of services, fees & material conflicts of interest
Rollover analysis	Analyze relevant factors to determine if a rollover is in the best interest of the customer; documentation recommended to prove compliance	Analyze relevant factors to determine if a rollover is in the best interest of the retirement investor; documentation & disclosure to retirement investor required

For more details, see the SEC’s Staff Bulletin: Standards of Conduct for Broker-Dealers and Investment Advisers Conflicts of Interest and the DOL’s PTE 2020-02 Improving Investment Advice for Workers & Retirees Frequently Asked Questions (except Q&A 7).

Investment professionals should work with their compliance staff to evaluate their business model and compensation structure to determine their compliance requirements under the SEC, the DOL, and any other governing agencies or state law.

[25-year Finance Executive of High-Growth Private and Public Tech Companies]

Pittsburgh, PA, September 10, 2024 – IRALOGIX, a leading retirement industry fintech provider, today announced the appointment of Keith Haas as Chief Financial Officer. Haas assumed his new position September 3 and reports to Peter de Silva, Chief Executive Officer.

“We are excited to welcome Keith to the IRALOGIX team and are eager to leverage his passion, expertise, and financial acumen to drive our continued growth,” said Peter de Silva, IRALOGIX CEO. “With his extensive background in the tech industry and a proven track record of financial leadership, Keith is the perfect fit to help us achieve our strategic objectives. We are confident that his insights and contributions will play a pivotal role in accelerating our growth and strengthening IRALOGIX’s position as a leader in the marketplace.”

“I’m excited to join IRALOGIX as CFO, especially at such a transformative time for our technology solutions to benefit the massive individual retirement account space. I look forward to shaping our business and financial strategy to fuel growth and deliver outstanding value to both customers and stakeholders,” Haas said.

Most recently, Haas served as CFO for FutureView Systems, a leading provider of solutions that empower financial transformation of management and accounting processes through innovative technology.

Previously, Haas held CFO positions at LeaseAccelerator, an enterprise SaaS company; Bridgestreet, a travel-tech platform; and Snagajob, a hiring and talent management solution for employers.

He has led multiple acquisitions and raised equity and debt totaling over $500 million across more than 15 transactions. Haas played a key role in the $1.3B sale of GeoEye, a commercial satellite data and imagery company, named the “Hottest Exit” by the Northern Virginia Technology Council in 2013.  “As IRALOGIX grows, Keith’s experience leading financial transformations will be critical,” said Pete Littlejohn, CRO and one of IRALOGIX’s founders. “Keith’s proven track record in driving operational efficiency and creating sustainable growth will ensure that we continue to deliver exceptional value to our clients while scaling our business to new heights.”

Haas is a Certified Public Accountant and has an MBA in finance. He resides in Virginia.

Beneficiaries of retirement savings have been in limbo for the past 4½ years because the SECURE Act of 2019 (1.0) radically changed the beneficiary distribution rules and the Treasury/IRS proposed an interpretation of those rules that was unexpected and never finalized. That uncertainty ends now, as the IRS finalized its regulations on the required minimum distribution (RMD) and beneficiary distribution rules under SECURE 1.0. The final regulations primarily confirm the proposed interpretations and apply beginning January 1, 2025. 

The question

SECURE 1.0 changed the rules so that most types of beneficiaries inheriting a retirement plan account or IRA in 2020 or later must deplete the inherited account by the end of the 10^th year after the account holder’s death. (The only beneficiaries who can stretch payments over their life expectancy are spouses, and those who are less than 10 years younger than the account holder, disabled or chronically ill,) The wording in SECURE 1.0 led many in the industry to believe the 10-year rule would apply in the same way as the old 5-year rule so that beneficiaries could take distributions at any time, including waiting until the 10^th year.

The IRS’s proposed regulations, however, indicated that beneficiaries whose only option is the 10-year rule and who inherit from an account holder who died after they had reached the beginning date for taking RMDs must take a life expectancy payment each year in addition to depleting the account by the end of the 10^th year. But because that interpretation wasn’t published until 2022 and has since remained just a proposal, it hasn’t been clear whether those beneficiaries need to take a payment each year. Due to this confusion, the IRS has waived the excise tax for beneficiaries in this category who did not take a required payment in 2021, 2022, 2023 or 2024.

The answer

The final regulations confirm the proposed interpretation of the 10-year rule for beneficiaries whose only option is the 10-year rule:

• If the account holder died BEFORE their required beginning date for RMDs, the beneficiary may take distributions at any time so long as the inherited account is depleted within 10 years.
• If the account holder died AFTER their required beginning date for RMDs, the beneficiary must take annual distributions based on the longer of their life expectancy or the account holder’s remaining life expectancy AND deplete the inherited account within 10 years.

The preamble to the regulations also confirms that beneficiaries affected by this issue don’t have to go back and take any missed distributions, but they must still count the years 2021–2024 in their 10-year countdown. For example, if an IRA owner died in 2020, the beneficiary’s 10-years to deplete the account expires at the end of 2030.

Financial advisors and financial institutions can now confidently assist clients with investment and tax strategies surrounding the timing of beneficiary distributions under the 10-year rule.

Stay tuned

The final regulations are lengthy and include other notable clarifications. The IRS also published proposed regulations to implement the additional changes for RMDs and beneficiaries made by SECURE 2.0.  IRALOGIX will continue analyzing both sets of regulations and will provide more details in the coming months.

Two federal courts in Texas have granted plaintiffs’ requests to delay the effective date of the DOL’s new fiduciary rule, pending further court action. As a result, the DOL’s most recent final regulations to re-define an “investment advice fiduciary” to cover more investment professionals, retirement accounts, and types of investments will not become effective September 23, 2024 – or possibly ever.

While one court’s ruling provides a stay of the fiduciary rule and PTE 84-24, the other court’s ruling includes the fiduciary rule and all accompanying PTE amendments, including PTE 2020-02.

Reasons for the stay

One lawsuit, filed in the Eastern District of Texas by the Federation of Americans for Consumer Choice and others, requested the court to stay the effective date and vacate the DOL’s final rule and PTE 84-24. Plaintiffs claim these pieces conflict with ERISA in several ways, including

• treating as fiduciaries those who engage in one-time recommendations to roll over assets from an ERISA plan to an IRA, and
• treating IRA fiduciaries as subject to the fiduciary duties under ERISA Title I.

On July 25, the court granted a stay of the effective date for the rule and PTE 84-24, stating the rule was too close to the DOL’s fiduciary rule that was vacated by the U.S. 5^th Circuit Court of Appeals in 2018, which also eliminated the “regular basis” and “primary basis” elements of the 1975 Five-Part test.

Another lawsuit, filed in the Northern District of Texas by the American Council of Life Insurers and others, requested a stay of the effective date of the DOL’s new fiduciary rule and all PTE amendments released with the rule. On July 26, this court granted plaintiffs’ request, citing the court order from the Eastern District and agreeing that the DOL’s new fiduciary package conflicts with ERISA and exceeds the DOL’s statutory authority.

Both court rulings state that plaintiffs are likely to succeed on the merits of their claim, with the Northern District stating that “plaintiffs are virtually certain to succeed” with their request for the new rule to be vacated.

Status Quo for now

Investment professionals providing advice to retirement savers should continue operating under the 1975 Five-Part test for determining non-discretionary fiduciary status under ERISA. If an advisor meets all five criteria of that test, the advisor will be deemed to be a fiduciary under ERISA and would need to meet the conditions of the existing PTE 2020-02 (or another exemption) to receive compensation that would otherwise be prohibited.