DOL Releases Proposed Regulation on Automatic Portability Under SECURE 2.0

The Department of Labor (DOL) has announced the release of a proposed regulation on automatic portability transactions pursuant to Section 120 of SECURE 2.0. Section 120 amended Internal Revenue Code Section 4975 to add a statutory exemption for the receipt of fees and compensation by an automatic portability provider for services provided in connection with an automatic portability transaction.

According to the press release, the proposal covers the following topics relative the exemption.

  • Scope of the exemption.
  • Disclosures about automatic portability transactions, fees, compensation, and services, including an acknowledgement of the automatic portability provider’s fiduciary status, website requirements for the automatic portability provider, and a requirement that disclosures be written in a culturally and linguistically appropriate manner.
  • Investments permitted in connection with automatic portability transactions.
  • Restriction on receipt or payment of third-party compensation by an automatic portability provider in connection with an automatic portability transaction.
  • Prohibition on exculpatory provisions disclaiming or limiting liability if an automatic portability transaction results in an improper transfer.
  • Required actions to ensure that participant and beneficiary data is current, accurate, and secure.
  • Limitations on the use of data related to automatic portability transactions for any purpose other than to execute such transactions or locate missing participants.
  • Record retention requirements.
  • Annual audit and corrections procedures if an auditor determines the automatic portability provider did not comply with the requirements of the statutory exemption and the proposed regulation.

Comments on the proposed rule are due 60 days after publication in the Federal Register.