What Is a 401(k) Rollover Recommendation?

A 401(k) rollover recommendation is advice about whether a participant should move plan assets—and where they should go. It is not the rollover transaction itself. That distinction matters sharply in 2026 because a plan-to-IRA recommendation is not automatically ERISA Title I fiduciary advice, even though operative PTE 2020-02 can cover a rollover when fiduciary advice and prohibited compensation actually exist.^[1][2]

The current framework requires four separate questions:

1. Can the money legally be rolled over?
2. Is the communication fiduciary investment advice under the five-part test?
3. If fiduciary advice creates a prohibited transaction, does an exemption such as PTE 2020-02 apply?
4. Is the rollover economically sensible for this participant?

Blurring those questions is where most explanations go wrong.

A Rollover Is a Transaction

A rollover moves eligible retirement assets from one retirement arrangement to another.

Common examples:

• former 401(k) → IRA
• former 401(k) → new employer 401(k)
• IRA → accepting employer plan
• plan → Roth IRA, with applicable tax consequences.

The IRS governs whether a distribution is eligible for rollover and how the transfer is completed.^[8]

No investment professional is required for the transaction to exist.

A Recommendation Is Different

Suppose a participant leaves an employer with:

$650,000

in the former plan.

A financial professional says:

> Move the entire balance to an IRA at this firm.

That is a recommendation.

Now questions arise about:

• relationship
• compensation
• conflicts
• account differences
• legal standard.

The tax code tells the participant whether the transfer is permitted.

It does not tell the participant whether the recommendation is good.

There Are Usually More Than Two Choices

The common sales framing is:

401(k) or IRA?

That is incomplete.

A former participant can often consider:

1. leave assets in the former employer plan, if permitted
2. roll to a new employer plan, if the receiving plan accepts rollovers
3. roll to an IRA
4. take a distribution, recognizing current tax and possible additional-tax consequences.

INV-057 covers the post-employment decision in detail.

The recommendation should compare realistic alternatives.

"IRA Gives You More Choice" Is Not Enough

An IRA can provide:

• thousands of mutual funds
• ETFs
• individual securities
• advisory accounts
• annuities
• cash products.

A 401(k) may offer:

• 15 carefully selected funds
• institutional share classes
• stable value
• low-cost target-date funds.

More available investments are useful only if they improve:

• portfolio construction
• cost
• service
• flexibility.

Choice has no independent investment return.

The Current ERISA Rule Is the 1975 Five-Part Test

DOL's 2024 Retirement Security Rule never became effective after federal-court litigation.

On March 20, 2026, DOL formally restored the earlier text in the CFR.^[2]

The current rule is again:

29 CFR 2510.3-21.^[1][2]

For nondiscretionary investment advice, the familiar five-part test matters.

The Five-Part Test Is Relationship-Based

The classic test looks for advice about securities or other property that is provided:

1. on a regular basis
2. under a mutual agreement, arrangement or understanding
3. with the understanding that it will serve as a primary basis
4. for advice individualized to the plan's particular needs
5. for fee or other compensation, direct or indirect.^[1]

All required elements matter.

The existence of a financially consequential recommendation does not allow one element to be skipped.

A Rollover Recommendation Is Not Automatically Fiduciary Advice

That is the current-law point to keep straight.

A person can recommend:

"Roll the 401(k) into this IRA."

and still fail the Title I five-part test if the required relationship is absent.

The most disputed element has been:

regular basis.

That dispute produced several years of litigation.

DOL's 2020 Rollover Interpretation Went Too Far

The preamble to PTE 2020-02 had taken an expansive view.

Among other things, DOL suggested that a first rollover recommendation could satisfy the regular-basis concept when it began an expected ongoing advisory relationship for the future IRA.

That interpretation treated future IRA advice as part of the relationship used to analyze the earlier Title I plan recommendation.

Courts rejected that approach.^[2][3][4]

ASA Vacated FAQ 7

DOL's 2021 FAQ 7 repeated the position that a rollover could begin a future ongoing IRA advisory relationship and thereby satisfy the regular-basis requirement.

In:

American Securities Association v. DOL

the federal district court vacated the policy referenced in FAQ 7 in February 2023.^[2][4]

DOL later withdrew its appeal.

The Department's current FAQ page itself carries a warning that the FAQ 7 policy was vacated.^[4]

Do not quote FAQ 7 as current law.

FACC Went Further in 2025

In:

Federation of Americans for Consumer Choice v. DOL

the Northern District of Texas vacated portions of DOL's rollover interpretation in July 2025.^[2][3]

The court rejected the use of:

• future Title II IRA advice
• a future ongoing IRA relationship
• an advisory relationship spanning the Title I plan and IRA

to establish the Title I plan's regular-basis requirement.^[2][3]

The distinction between Title I plan advice and Title II IRA advice became central.

The Future IRA Relationship Cannot Bootstrap Title I

This is the practical result.

Assume:

Before rollover

Adviser has never advised the participant about the employer plan.

Rollover meeting

Adviser recommends:

401(k) → IRA

After rollover

Adviser expects to manage the IRA for 20 years.

The future IRA relationship cannot simply be used to manufacture a pre-rollover:

regular-basis Title I advisory relationship with the plan.^[2][3]

That is precisely the theory the litigation rejected.

DOL Changed Its Position in March 2026

The most important current update is broader than the individual court holdings.

In the March 20, 2026 Federal Register notice, DOL said the exemption's 2020 preamble is:

no longer reliable

because of the court vacaturs.^[2]

The Department then stated its view that:

the entire preamble is effectively vacated.^[2]

That is unusually strong language.

It means older articles that rely heavily on the 2020 preamble need to be revisited.

The Preamble Is Gone; the Exemption Is Not

This distinction is essential.

2020 interpretive preamble

DOL says it is effectively vacated and unreliable.^[2]

Operative exemption terms

Remain in effect.^[2]

The March 2026 notice republishes the operative exemption in full without the vacated 2024 amendments.^[2]

Do not say:

"The entire exemption was vacated."

That is inaccurate.

The Exemption Still Expressly Covers Rollovers

The operative exemption allows specified prohibited-transaction relief for fiduciary investment advice, including transactions:

as part of a rollover from a plan to an IRA

when its requirements are met.^[2]

But the wording begins from an important premise:

fiduciary investment advice must exist.

The exemption does not create fiduciary status merely because a rollover occurred.

Status First, Exemption Second

Use the sequence:

Step 1

Apply the five-part test.

Step 2

Determine whether fiduciary advice exists.

Step 3

Identify compensation or transaction conflicts.

Step 4

Determine whether the operative class exemption or another route is needed and available.

That sequence prevents circular reasoning.

Wrong:

PTE mentions rollovers → rollover must be fiduciary advice.

Correct:

If rollover advice is fiduciary advice and produces a prohibited transaction → test the applicable exemption.

When Can Rollover Advice Still Be Fiduciary?

The litigation did not erase fiduciary rollover advice.

Consider an adviser who has already been providing recurring individualized advice concerning the participant's investments inside the ERISA plan.

The relationship may include:

• quarterly allocation reviews
• repeated plan-fund recommendations
• mutual understanding that the advice is a primary basis for participant investment decisions
• compensation tied to the advisory service.

If that adviser later recommends moving the account, the rollover recommendation can arise inside an existing Title I advisory relationship.

That is materially different from using future IRA advice to manufacture the prior relationship.

Example: Isolated Rollover Sales Conversation

Participant has never worked with Adviser A.

After retirement, Adviser A calls once and recommends:

roll $500,000 from plan to IRA.

No prior or recurring plan-advice relationship exists.

The recommendation is individualized.

Adviser will earn money if the IRA opens.

Those facts are significant.

But the Title I five-part test still includes the regular-basis requirement.^[1]

Do not call the recommendation automatically fiduciary under ERISA merely because:

• it is specific
• compensation exists
• the amount is large.

Example: Existing Plan Adviser

For four years, Adviser B has:

• reviewed participant's 401(k) investments every six months
• recommended specific plan funds
• advised on allocation changes
• been paid for the service.

At retirement, Adviser B recommends moving the balance into an IRA managed by the same firm.

That rollover sits inside a much stronger preexisting Title I advisory fact pattern.

Now fiduciary status and prohibited-transaction relief deserve direct analysis.

Fine Print Does Not Decide Every Relationship Issue

The restored five-part test requires a:

mutual agreement, arrangement or understanding

and a primary-basis relationship.^[1]

Contracts and disclosures matter.

So do:

• actual communications
• service model
• marketing
• repeated conduct
• participant expectations.

A disclaimer can be evidence.

It is not a substitute for analyzing what the parties actually established.

The safest current approach is to rely on the regulatory text and valid authorities—not the effectively vacated 2020 preamble.

What Does PTE 2020-02 Require?

When the exemption is actually being used, the operative text imposes substantial conditions.^[2]

Key requirements include:

• Impartial Conduct Standards
• fiduciary acknowledgment
• services/conflicts disclosure
• written rollover rationale
• policies and procedures
• annual retrospective review
• recordkeeping
• eligibility conditions.

The exemption is not:

sign a fiduciary form and proceed.

Written Fiduciary Acknowledgment

Before a covered transaction, the financial institution provides written acknowledgment that it and its investment professionals are fiduciaries under:

• ERISA Title I
• Code

as applicable to the fiduciary investment advice being provided.^[2]

That acknowledgment is tied to advice that actually meets the relevant fiduciary definition.

It does not rewrite the five-part test.

Services and Material Conflicts

The financial institution also provides a written description of:

• services
• material conflicts of interest

that is accurate and not materially misleading.^[2]

A rollover can create an obvious revenue change.

Example:

Before

Participant pays plan investment expenses of:

0.08%

and no separate adviser fee.

After

Firm earns:

0.90% annually

on a $700,000 IRA.

Annual advisory revenue:

$6,300

before balance changes.

That economic incentive should not be hidden behind the word:

consolidation.

The Impartial Conduct Standards Matter

The operative exemption requires advice to satisfy its Impartial Conduct Standards.^[2]

The best-interest component uses a prudence-and-loyalty structure based on:

• investment objectives
• risk tolerance
• financial circumstances
• participant needs.^[2]

The exemption also addresses:

• reasonable compensation
• best execution where applicable
• materially misleading statements.^[2]

A rollover recommendation cannot be justified solely because the receiving account is legally available.

Specific Rollover Reasons Must Be Documented

The 2026-republished operative exemption expressly requires the financial institution to document the specific reasons that a recommendation involving a rollover or account-type change is in the retirement investor's best interest.^[2]

For a covered rollover recommendation, that documentation is provided to the retirement investor before the rollover transaction under the exemption.^[2]

This requirement survives.

It is in the operative exemption text—not merely the discarded preamble.

Do Not Confuse the Valid Documentation Rule With Vacated Guidance

Older DOL FAQ material supplied detailed examples of what DOL thought should be compared.

Some rollover guidance was litigated.

The safest 2026 statement is:

The operative PTE text still requires a specific written best-interest rationale. The old PTE preamble should not be treated as reliable interpretive guidance for applying the five-part fiduciary test.^[2]

Those two facts can coexist.

Policies Must Mitigate Conflicts

The class exemption requires written policies and procedures designed to support compliance and mitigate conflicts so compensation structures do not create incentives to put the firm's or professional's interests ahead of the retirement investor.^[2]

That matters most at rollover moments because:

• assets become portable
• revenue can move from zero to substantial
• proprietary products can enter
• commission/advisory structures can change.

A rollover is often both:

a retirement decision

and:

a revenue event.

Annual Retrospective Review

PTE 2020-02 requires the financial institution to conduct a retrospective review at least annually.^[2]

The review is designed to help:

• detect violations
• prevent violations
• test compliance with Impartial Conduct Standards and policies.

The methodology and results are put in a written report.

A senior executive officer provides the required certification.^[2]

Rollovers should be visible in that review.

The Rollover Comparison Starts With the Existing Plan

Before recommending an IRA, understand the account being abandoned.

Important plan facts can include:

• total investment expenses
• recordkeeping charges
• employer-paid administrative costs
• available funds
• stable-value option
• institutional pricing
• brokerage window
• loan rights
• withdrawal rules
• adviser access
• employer stock
• legal protections.

A recommendation based only on the participant's current fund holdings is incomplete.

The account is more than its current allocation.

Employer-Paid Costs Matter

Suppose former plan costs participant:

0.10%

because the employer pays most administration.

IRA:

• advisory fee: 0.80%
• fund expenses: 0.10%

Difference:

0.80 percentage point

on $600,000:

$4,800 in year one

before balance changes.

The IRA may provide services worth that cost.

The cost itself cannot be ignored.

Lower IRA Cost Can Be Real Too

Reverse the example.

Old small-employer plan:

• investment expense: 0.75%
• admin allocation: 0.25%

Total participant cost:

1.00%

Self-directed IRA:

• ETF cost: 0.05%
• no advisory fee
• minimal account charges.

A rollover can substantially reduce cost.

There is no rule that 401(k) is always cheaper.

The comparison has to use actual accounts.

Advice Service Can Justify Higher Cost

Suppose:

Old plan

0.12% all-in investment/admin cost No personalized advice

IRA

0.90% advisory + investment cost Includes tax coordination, withdrawal planning, investment management and estate-service coordination

The IRA costs materially more.

That does not automatically make the rollover bad.

The correct question is:

Are the added services relevant to this participant and worth the long-term fee difference?

Higher cost requires a reason.

Not an apology.

Put the Fee Difference in Dollars

Participant balance:

$850,000

Plan cost:

0.15% = $1,275/year

IRA total cost:

0.95% = $8,075/year

Incremental cost:

$6,800/year

At that scale, vague benefits such as:

• more choices
• personalized service
• easier dashboard

need quantification or substantive explanation.

The fee difference compounds.

The Rule of 55 Can Change the Answer

IRS rules provide a separation-from-service exception to the 10% additional tax for certain qualified-plan distributions after separation during or after the calendar year the participant reaches:

55.^[9]

The ordinary IRA rule does not provide the same age-55 separation exception.^[9]

That means a participant aged:

56

can have very different early-access economics before and after a rollover.

Example: 57-Year-Old Needs Cash

Participant leaves employer at:

57

and expects to withdraw:

$40,000 per year

until age 59½.

If the former 401(k) qualifies for the separation-from-service exception, those distributions can avoid the 10% additional tax under the applicable rule.^[9]

Roll the full account to a traditional IRA first and the ordinary IRA distributions do not inherit that plan-specific Rule-of-55 exception.

A recommendation that ignores this can create an avoidable tax cost.

Partial Rollover Can Sometimes Preserve Options

The decision does not always have to be:

all plan

or:

all IRA.

Depending on plan terms and participant circumstances, a participant may be able to:

• retain some assets in the plan
• roll some assets elsewhere.

That can matter when preserving:

• near-term withdrawal access
• stable value
• employer stock
• plan-specific pricing.

The plan document and distribution rules control whether a partial approach is available.

RMD Timing Can Differ

For a traditional IRA owner, RMDs generally begin based on the applicable required-beginning-age rules regardless of continued employment.^[10]

For a participant in a qualified defined contribution plan, a non-5% owner can generally have a required beginning date tied to the later of:

• applicable age
• retirement

if the plan permits the delay.^[10]

That distinction can matter for a participant still working in the 70s.

Example: Working at 74

Participant:

• age 74
• still employed
• not a 5% owner
• current employer plan permits still-working RMD delay.

Moving those assets to a traditional IRA can change the timing framework.

A recommendation should check:

• which employer plan
• ownership status
• plan terms
• IRA RMD rules.

"Both are retirement accounts" is not enough.

Loans Disappear in an IRA

Qualified plans such as 401(k)s may offer participant loans.^[11]

IRAs cannot.^[11]

For a participant who values:

• emergency liquidity
• borrowing access

that feature can matter.

A former plan may restrict new loans after termination, so the actual plan terms must be checked.

The point is not:

401(k)s always have loans.

It is:

IRA cannot preserve a participant-loan feature.

Outstanding Loans Need Special Attention

Leaving employment can cause an outstanding plan loan to become:

• payable
• offset against the account

depending on plan terms and circumstances.

Qualified plan loan offsets can have special rollover timing extending beyond the ordinary 60-day period.^[8]

A rollover recommendation should therefore identify:

• loan balance
• whether offset will occur
• whether it is a qualified plan loan offset
• amount needed to complete rollover.

Do not move the rest of the account and discover the loan tax issue afterward.

Employer Stock Can Be the Biggest Hidden Tax Issue

A 401(k) holding highly appreciated employer securities can raise:

net unrealized appreciation

or:

NUA

planning issues.^[12][13]

Under qualifying circumstances, employer stock distributed from the plan can receive special tax treatment in which the NUA is not taxed at distribution and is later taxed under capital-gain rules when the shares are sold.^[12]

That can be valuable.

It can also be inapplicable.

Rolling Employer Stock Can Eliminate the NUA Route

Current IRS safe-harbor rollover explanations warn that if employer stock or its proceeds are rolled into an IRA, the special NUA rule generally will not be available for later IRA distributions involving those assets.^[13]

That makes this question mandatory before rollover:

Does the plan hold materially appreciated employer stock?

If yes:

do not default to a full IRA rollover before analyzing the tax consequences.

Example: Highly Appreciated Company Stock

Plan holds employer stock:

• cost basis: $80,000
• market value: $500,000

NUA:

$420,000

A full cash rollover to an IRA can foreclose the special plan-distribution NUA treatment for that stock.^[12][13]

Whether NUA is actually better depends on:

• eligibility
• tax rates
• diversification
• concentration risk
• timing
• estate planning
• other assets.

The point is not:

always use NUA.

It is:

an irreversible rollover should not occur before NUA is analyzed.

Creditor Protection Can Differ

ERISA-qualified plan assets generally operate within the plan's federal protection framework.

IRA protection depends on:

• federal bankruptcy law
• type/source of IRA assets
• applicable state law
• facts of the creditor claim.

A rollover can therefore change the legal-protection analysis.

Because the result is jurisdiction- and claim-specific, generic claims such as:

"IRA protection is exactly the same"

should be avoided.

Participants with material creditor concerns need account-specific legal advice.

Services Should Be Compared, Not Assumed

IRA providers can offer:

• financial planning
• tax-aware investment management
• beneficiary coordination
• withdrawal strategy
• consolidated reporting.

Employer plans can offer:

• institutional investments
• call-center guidance
• managed accounts
• low-cost advice tools
• plan-specific distributions
• stable-value access.

Neither wrapper owns the word:

service.

Compare what the participant will actually receive.

Consolidation Has Real Value

A participant with:

• four old plans
• two IRAs
• changing beneficiaries
• several recordkeeper logins

can benefit from consolidation.

Benefits can include:

• easier asset allocation
• fewer statements
• simpler beneficiary maintenance
• fewer forgotten accounts.

But consolidation is not automatically an argument for an IRA.

A new employer plan can sometimes serve the same purpose.

A New Employer Plan Is Often Ignored

Suppose participant changes jobs.

New plan:

• accepts rollovers
• has 0.03% index funds
• strong stable-value option
• $40 annual administration
• institutional target-date CITs.

IRA recommendation:

• 0.85% adviser fee
• 0.10% underlying funds.

If the adviser compares only:

old plan vs IRA

the analysis misses a potentially superior third option.

Investment Choice Can Be Worse Through Excess Choice

A 401(k) may intentionally limit participants to:

• diversified
• institutionally priced
• screened options.

An IRA can add:

• leveraged ETFs
• individual stocks
• options
• expensive niche products.

For a disciplined investor, flexibility can be useful.

For another participant, more choice can create:

• concentration
• trading
• product-cost risk.

"More investments" should not be treated as a universal benefit.

The Receiving IRA Structure Matters

An IRA can be:

Self-directed brokerage IRA

Low-cost investments, participant manages portfolio.

Advisory IRA

Ongoing asset-based fee and professional management.

Commission brokerage IRA

Transaction or product compensation.

Insurance-based IRA

Annuity or other insurance product with separate costs/features.

The label:

IRA

does not reveal the economics.

The receiving arrangement must be identified before the rollover is judged.

An Adviser Can Earn Much More After a Rollover

This is the central conflict in many recommendations.

Before rollover:

• adviser receives $0 on plan assets.

After rollover:

• adviser receives 1% annually.

On:

$1 million

first-year gross advisory fee:

$10,000

before balance changes.

That does not prove the recommendation is wrong.

It proves the conflict is economically significant.

A strong process makes the rollover case even after assuming the adviser is paid.

A Conflict Is Not a Conclusion

Two bad shortcuts:

Shortcut 1

Adviser gets paid → rollover is bad.

Wrong.

Valuable advice can deserve compensation.

Shortcut 2

Adviser disclosed fee → conflict solved.

Also wrong.

Disclosure tells the participant the incentive exists.

The recommendation still needs a defensible substantive basis.

Regulation Best Interest Is a Separate Layer

For broker-dealers, SEC Regulation Best Interest expressly reaches:

• account recommendations
• recommendations to open IRAs
• recommendations to roll or transfer assets from workplace retirement plans into IRAs.^[6][7]

That analysis is separate from whether ERISA Title I fiduciary status exists under the five-part test.

A recommendation can therefore be:

• outside Title I fiduciary status
• still subject to Reg BI

when made by a covered broker-dealer to a retail customer.

Reg BI Looks at Account Features and Costs

SEC guidance says account-type and rollover analysis should consider factors such as:^[6][7]

• services and products
• projected costs
• reasonably available account alternatives
• customer-requested services
• investment profile
• fees and expenses
• available investments
• penalty-free withdrawal ability.

FINRA examination guidance has also emphasized account features such as:

• RMD treatment
• creditor/legal protection
• employer stock

when relevant.

Different law.

Similar economic questions.

ERISA and Reg BI Can Reach Different Conclusions About Status

Suppose one-time broker recommendation:

401(k) → IRA

fails the ERISA five-part test because no regular-basis Title I advisory relationship exists.

That does not mean:

no standard applies.

If the person is acting as a broker-dealer making an account recommendation to a retail customer, Reg BI can apply.^[6][7]

State fiduciary, insurance or adviser rules can also matter depending on the provider and transaction.

"Not ERISA fiduciary" does not mean:

unregulated sales conversation.

A Plan's 402(f) Notice Is Not Personalized Advice

When an eligible rollover distribution is available, the plan administrator generally provides required rollover information explaining:

• direct rollover rights
• tax consequences
• withholding
• other distribution rules.^[8][13]

That notice is not the same as:

"You should move your money to IRA X."

It explains legal options.

It does not select a destination for the participant.

Direct Rollover Usually Avoids Mandatory Plan Withholding

If eligible plan money is paid directly to the receiving plan or IRA, federal withholding generally does not apply to the transferred amount.^[8]

If the eligible taxable distribution is paid to the participant, the plan generally withholds:

20%.^[8]

The participant then usually has:

60 days

to complete a rollover, subject to special rules and relief.^[8]

These mechanics are tax rules.

They do not determine whether the original recommendation was prudent.

Do Not Turn a Rollover Recommendation Into a Tax Accident

Example:

Eligible distribution:

$100,000

Participant asks for check payable personally.

Plan withholds:

$20,000

Participant receives:

$80,000.

To roll the full $100,000 within the 60-day framework, the participant generally must replace the $20,000 withheld from other funds.^[8]

A direct rollover would ordinarily avoid that withholding issue.

Advice about destination and execution should not be separated.

The Rollover Comparison Should Be Written Before the Money Moves

A useful comparison includes:

Existing plan

• all-in participant cost
• investment menu
• stable value
• advice
• withdrawal rights
• employer stock
• loan status
• legal protections.

New employer plan

• accepts rollover?
• cost
• investments
• services
• loans
• RMD implications.

Proposed IRA

• custodian
• adviser
• investment strategy
• advisory fee
• fund/product cost
• trading cost
• services
• surrender or liquidity limits.

Participant

• age
• employment status
• need for withdrawals
• tax bracket
• employer stock
• other assets
• creditor concerns
• desire for advice.

That document should exist before the transfer.

Example: Rollover Looks Weak

Participant:

• age 58
• recently separated
• needs $30,000/year until 60
• former plan cost 0.12%
• strong stable value
• no current adviser fee
• IRA proposal costs 1.05%
• no unusual planning need.

Potential concerns:

• Rule-of-55 access
• much higher cost
• loss of stable value
• limited incremental service.

"More investment options" is not a strong answer.

Example: Rollover Looks Stronger

Participant:

• age 64
• no need for Rule of 55
• old plan costs 1.10%
• poor fund lineup
• no retirement-withdrawal support
• several old accounts
• proposed IRA costs 0.35% all-in
• diversified low-cost portfolio
• better consolidation.

Now the economic case can be strong.

A rollover should be allowed to win when the facts favor it.

Example: New Employer Plan Wins

Participant:

• age 48
• new employer accepts rollovers
• plan uses institutional index CITs averaging 0.04%
• participant wants one account
• expects to work another 15 years
• new plan has useful loan feature
• IRA adviser proposes 0.90%.

The receiving employer plan may provide:

• consolidation
• low cost
• plan protections
• simplicity

without the IRA advisory fee.

A proper recommendation must consider it.

Example: NUA Stops the Full Rollover

Participant:

• age 62
• 401(k) balance $1.2 million
• employer stock value $400,000
• stock basis $70,000
• rest of account diversified funds.

A full rollover without tax analysis can destroy a potentially valuable NUA strategy for the employer-stock portion.^[12][13]

A more sophisticated distribution/rollover structure may be appropriate.

Do not let account-consolidation convenience erase a tax election.

What Should a Participant Ask the Adviser?

1. Are you acting as a fiduciary for this recommendation?
2. If yes, under which law and exemption?
3. How much will your firm earn if I roll over?
4. How much does my current plan cost?
5. Did you compare the new employer plan?
6. What services am I buying with the higher fee, if any?
7. Do I lose Rule-of-55 access?
8. Does my current plan hold employer stock with NUA?
9. Do I have an outstanding plan loan?
10. Will RMD timing change?
11. Will legal/creditor protection change?
12. Can I accomplish the same goal without moving the entire account?

The DOL's participant question guide specifically encourages workers to ask why the rollover better serves their interests and retirement goals.^[5]

What Should a Financial Institution Document?

When relying on PTE 2020-02 for a covered recommendation, the file should support:

Fiduciary status

Why the advice is being treated as fiduciary advice.

Conflict

What compensation or other prohibited-transaction concern exists.

Existing plan facts

• costs
• services
• investments
• relevant features.

Alternative accounts

• former plan
• new employer plan where available
• proposed IRA.

Participant facts

• age
• withdrawal needs
• goals
• risk
• employment
• tax-sensitive holdings.

Rollover rationale

Specific reasons the transaction is in the participant's best interest under the operative exemption.^[2]

Disclosure

• fiduciary acknowledgment
• services
• material conflicts
• rollover rationale.

The file should tell the same story as the recommendation.

A Template Rationale Is Weak Evidence

Bad:

> The IRA provides greater flexibility and professional management.

That can be pasted into almost any file.

Better:

> Participant is 67, has no need for plan loans or Rule-of-55 access, former plan costs 0.82%, proposed IRA is expected to cost 0.38%, participant wants consolidation of three former plans, no employer stock is held, and proposed service includes withdrawal management not available through the former plan.

Specificity reveals whether the recommendation was actually analyzed.

Current-Law Rollover Timeline

1975

Five-part fiduciary-advice regulation established.

2020

The 2020 class exemption was granted; its preamble offered a broader rollover interpretation.

2021

DOL FAQs expanded on rollover interpretation.

February 2023

ASA court vacated the policy referenced in FAQ 7.^[2][4]

July 2025

FACC court vacated portions of DOL's rollover interpretation using future Title II IRA relationships to establish Title I status.^[2][3]

March 2026

DOL restored the five-part rule to the CFR and stated that the exemption's entire 2020 preamble is effectively vacated and not reliable guidance.^[2]

Current operative position

• five-part test is current
• the operative class exemption remains in force
• 2020 preamble should not be relied on
• rollover analysis must separate Title I fiduciary status from later IRA advice.

That is the framework a 2026 article should use.

Five-Part Test vs. the Operative Class Exemption

Never use the exemption to answer the status question backwards.

Old Plan vs. New Plan vs. IRA

No column wins every row.

ERISA vs. Regulation Best Interest

A single conversation can implicate both regimes differently.

Frequently Asked Questions

Is rolling a 401(k) into an IRA legal?

Usually eligible plan distributions can be rolled to an IRA, subject to rollover eligibility and tax rules.^[8]

Is a rollover recommendation automatically ERISA fiduciary advice?

No.

Current Title I analysis uses the restored five-part test.^[1][2]

What is the most important five-part issue for a one-time rollover?

Often the regular-basis relationship requirement, although every element must be tested.^[1]

Can future IRA advice satisfy the plan's regular-basis requirement?

Current 2026 analysis should not rely on that theory. The 2025 FACC order vacated DOL's attempt to use future or ongoing Title II IRA advice to establish Title I fiduciary status for the plan recommendation.^[2][3]

Is DOL FAQ 7 still valid?

The DOL page notes that the policy referenced in FAQ 7 was vacated in 2023.^[4]

Is the 2020 PTE preamble still valid guidance?

DOL stated in March 2026 that the entire preamble is effectively vacated and no longer reliable guidance.^[2]

Is PTE 2020-02 itself still effective?

Yes.

DOL republished the class exemption in 2026 and stated that its terms and conditions remain in full effect.^[2]

Why does PTE 2020-02 still mention rollovers?

Because the exemption can provide relief when a rollover results from fiduciary investment advice and otherwise creates a prohibited transaction.^[2]

Does the exemption require written rollover reasons?

Yes.

The operative text requires specific reasons for covered rollover or account-type recommendations to be documented, with the required rollover documentation provided to the retirement investor before the transaction under the exemption.^[2]

Does a rollover always save money?

No.

Compare actual plan and IRA costs.

Can an IRA cost less?

Yes.

Low-cost self-directed IRAs can be cheaper than expensive employer plans.

Can an IRA cost much more?

Yes.

Asset-based advisory fees, commissions, annuity charges and product expenses can materially exceed low-cost institutional plan pricing.

What is the Rule of 55 issue?

Certain qualified-plan distributions after separation in or after the year the participant reaches 55 can avoid the 10% additional tax. Ordinary IRA withdrawals do not receive that same separation-from-service exception.^[9]

Can an IRA provide a participant loan?

No.^[11]

Can RMD timing change after an IRA rollover?

Yes.

Traditional IRA RMD timing can differ from a current-employer defined contribution plan for a non-5% owner who continues working.^[10]

Why check employer stock before rolling over?

A qualifying employer-stock distribution can have NUA tax treatment. Rolling the stock or proceeds into an IRA can eliminate later use of that special treatment for those assets.^[12][13]

Does a broker have duties even if the recommendation is not an ERISA fiduciary recommendation?

Potentially yes.

SEC Regulation Best Interest expressly applies to broker-dealer account and rollover recommendations to retail customers.^[6][7]

The ROIStreet Rollover Recommendation Test

Identify whether the communication is education, information or a recommendation → identify the plan assets and eligible distribution rights → apply the current five-part test without relying on the effectively vacated 2020 preamble → separate prior Title I plan-advice facts from future Title II IRA relationships → determine whether fiduciary status actually exists → identify the adviser's compensation before and after rollover → determine whether a prohibited transaction exists → if relying on PTE 2020-02, apply the operative 2026-republished text → obtain the existing plan's actual fees, investment menu and services → compare the new employer plan if available → identify the exact IRA structure and all-in cost → test Rule-of-55 consequences → test RMD timing → identify current or potential plan-loan issues → identify employer stock and NUA before moving it → flag creditor-protection differences when material → quantify incremental annual fees in dollars → identify specific services or features gained → identify specific features surrendered → document why the recommendation is favorable to this participant rather than merely profitable to the provider → execute the transfer using correct rollover mechanics

The strongest rollover analysis does not begin with:

"An IRA gives you more flexibility."

It begins with:

"What does this participant gain, what do they give up, what does each choice cost, and which legal standard actually governs the recommendation?"

Sources & References

1. Electronic Code of Federal Regulations / Legal Information Institute: 29 CFR §2510.3-21 — Definition of Fiduciary — https://www.law.cornell.edu/cfr/text/29/2510.3-21
2. Federal Register / U.S. Department of Labor: Retirement Security Rule: Definition of an Investment Advice Fiduciary — Notice of Court Vacatur and Republication of PTE 2020-02 — https://www.govinfo.gov/content/pkg/FR-2026-03-20/pdf/FR-2026-03-20.pdf
3. U.S. Department of Labor — Employee Benefits Security Administration: Joint Stipulation of Dismissal Without Prejudice — Advisory Opinion 2005-23A Litigation — https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/advisory-opinions/2005-23a-joint-stipulation-of-dismissal
4. U.S. Department of Labor — Employee Benefits Security Administration: New Fiduciary Advice Exemption FAQs — PTE 2020-02 — https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/new-fiduciary-advice-exemption
5. U.S. Department of Labor — Employee Benefits Security Administration: Questions to Ask an Investment Advice Provider — https://www.dol.gov/sites/dolgov/files/ebsa/laws-and-regulations/laws/erisa/investment-advice-provider-questions.pdf
6. U.S. Securities and Exchange Commission: Regulation Best Interest — https://www.sec.gov/resources-small-businesses/small-business-compliance-guides/regulation-best-interest
7. U.S. Securities and Exchange Commission: Frequently Asked Questions on Regulation Best Interest — https://www.sec.gov/rules-regulations/staff-guidance/trading-markets-frequently-asked-questions/faq-regulation-best
8. Internal Revenue Service: Rollovers of Retirement Plan and IRA Distributions — https://www.irs.gov/retirement-plans/plan-participant-employee/rollovers-of-retirement-plan-and-ira-distributions
9. Internal Revenue Service: Retirement Topics — Exceptions to Tax on Early Distributions — https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-exceptions-to-tax-on-early-distributions
10. Internal Revenue Service: RMD Comparison Chart — IRAs vs. Defined Contribution Plans — https://www.irs.gov/retirement-plans/rmd-comparison-chart-iras-vs-defined-contribution-plans
11. Internal Revenue Service: Retirement Topics — Loans — https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-loans
12. Internal Revenue Service: Publication 575 — Pension and Annuity Income — https://www.irs.gov/publications/p575
13. Internal Revenue Service: Notice 2026-13 — Safe Harbor Explanations for Eligible Rollover Distributions — https://www.irs.gov/pub/irs-drop/n-26-13.pdf

Educational Disclaimer

ROIStreet publishes educational content about retirement-plan rollovers, IRAs, investment recommendations, ERISA fiduciary rules, securities regulation and tax considerations. This article is not legal, fiduciary, tax, securities, investment or individualized rollover advice. Whether a rollover recommendation creates ERISA fiduciary status depends on the actual relationship and the current five-part test. Whether PTE 2020-02 is available depends on fiduciary status, compensation, transaction structure and compliance with the operative exemption. Plan and IRA costs, withdrawal rights, RMDs, loans, employer-stock tax treatment and legal protections vary by participant and account.

The ROIStreet Reader Promise

We strive to explain before we evaluate, present evidence before opinions, discuss risks alongside potential benefits, distinguish facts from analysis, and correct material errors transparently.

Our purpose is to help readers better understand investing—not to tell them what to do.