Consider the following scenario:
You have an on-prem mailbox, but decide to move your online archives to Office 365 to take advantage of the “Unlimited” storage. No problem. That works great for existing mailboxes, but when creating new archives in the cloud, you discover that the policy retention tags are not surfaced to the end-user in Outlook and the ability to archive to a pst remains.
You have a few options:
Run: Start-ManagedFolderAssistant <user>
If that doesn’t work, move the online back on-premises and run Start-ManagedFolderAssistant. Alternatively, if the archive is unused, disable it, re-enable on-prem ( and run Start-ManagedFolderAssistant to speed things up). Once the policy tags appear, move it back to Office 365.
P.S. Ensure you have imported all the on-premises tags to Office 365 per the link below. Otherwise the automatic archiving will not work!