PTE 2020-02 Compliance Guide
Complete guide to Department of Labor rollover analysis requirements. Learn how to ensure your rollover recommendations meet best interest standards and avoid regulatory penalties.
Understanding PTE 2020-02
PTE 2020-02 is the Department of Labor's landmark rule that allows financial advisors to receive compensation for rollover recommendations, but only if they meet strict best interest standards and comprehensive documentation requirements.
Compliance is Mandatory
Failure to comply with PTE 2020-02 can result in significant penalties, loss of exemption protection, and potential prohibited transaction violations.
Four Pillars of PTE 2020-02 Compliance
Every rollover recommendation must meet these core requirements
Best Interest Analysis
Document that the rollover recommendation serves the best interest of the retirement investor
- Compare current plan vs. proposed IRA objectively
- Document all material facts and considerations
- Show how recommendation aligns with client goals
- Include alternatives considered and why they were rejected
Fee and Service Comparison
Provide clear comparison of costs and services between current plan and proposed IRA
- Administrative fees comparison
- Investment expense ratios
- Service offerings and features
- Account fees and minimums
Impartial Conduct Standards
Act in the best interest of the retirement investor without conflicts of interest
- No incentives based on recommendations
- Full disclosure of any compensation
- Independent analysis methodology
- Client-focused decision making
Documentation Requirements
Maintain complete records of the analysis and recommendation process
- Written analysis of alternatives
- Basis for recommendations
- Client acknowledgments
- Audit trail of decision process
How Our Tool Ensures PTE 2020-02 Compliance
Automated compliance features built into every analysis
Automated Documentation
Every analysis includes all required PTE 2020-02 disclosures and documentation automatically.
Impartial Analysis
Structured workflow ensures objective comparison of all alternatives without bias.
Complete Audit Trail
Every decision, data source, and analysis step is logged for regulatory review.
Risks of Non-Compliance
The consequences of failing to meet PTE 2020-02 requirements are severe
Loss of Exemption
Lose protection from prohibited transaction rules, exposing all past recommendations to scrutiny.
Civil Penalties
DOL can impose civil penalties up to $135,431 per violation for serious compliance failures.
Regulatory Scrutiny
Increased likelihood of SEC, FINRA, and state regulator examinations and enforcement actions.
Reputational Damage
Loss of client trust and damage to professional reputation from compliance violations.
Frequently Asked Questions
Common questions about PTE 2020-02 compliance
What is PTE 2020-02?
PTE 2020-02 is the Department of Labor's Prohibited Transaction Exemption that allows financial advisors to receive compensation for recommending 401(k) rollovers to IRAs, provided they meet strict best interest standards and documentation requirements.
Who needs to comply with PTE 2020-02?
Any financial advisor or firm that receives compensation (commissions, fees, or other financial incentives) for recommending that a retirement investor roll over assets from an employer-sponsored retirement plan to an IRA must comply with PTE 2020-02.
What are the key requirements?
The key requirements include: acting in the best interest of the retirement investor, providing impartial analysis comparing alternatives, documenting the analysis process, disclosing any conflicts of interest, and maintaining records for regulatory review.
What happens if I don't comply?
Non-compliance can result in significant penalties including loss of exemption protection, potential prohibited transaction violations, regulatory sanctions, civil penalties, and potential loss of ability to do business in retirement accounts.
How does your tool help with compliance?
Our tool automates the PTE 2020-02 compliance process by providing structured analysis workflows, automated fee comparisons, best interest documentation templates, and complete audit trails. Every analysis includes all required disclosures and comparisons.
Do I need to use your tool to be compliant?
No, but using our tool significantly reduces compliance risk by ensuring all required elements are included in every analysis. Manual processes are prone to human error and inconsistent documentation.
Ensure PTE 2020-02 Compliance with Every Analysis
Our automated tool includes all required compliance elements in every rollover analysis.