In Exchange 2010, we introduced Personal Archives, an email archiving feature intended to allow you to reduce or eliminate PST files by provisioning archive mailboxes for your users. For more d...
Updated Apr 28, 2020
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Office 365 Beta: Completing provisioning of archive in the cloud from your on-premises Exchange 2010 server
@Mike: As Ankur suggests, you'll need to pick one or the other. You can't archive-enable mailboxes that have a Managed Folder policy assigned. You can use Retention Policies, the MRM feature introduced in Exchange 2010.