DOL Issues Final Rule Updating Investment Advice Fiduciary Definition

The U.S. Department of Labor issued final regulations Tuesday broadening who qualifies as a fiduciary under the Employee Retirement Income Security Act (ERISA), backing off some changes included in a proposal the agency released in October.

Under ERISA, fiduciaries are legally obligated to act in the best interests of the retirement plan participants they advise. The new regulations broaden the scope of situations in which someone can be considered an investment advice fiduciary, meaning a wider range of market participants will need to comply with ERISA or obtain exemptions to conduct business involving retirement assets.

The final regulatory package includes changes to ERISA’s definition of an investment advice fiduciary, which will be implemented over a staggered time period. Certain standards outlined in the final rule must be complied with by September, with a one-year transition period afterward for certain conditions in the transaction exemptions. Key changes include considering one-time rollover transactions into IRA or annuity products as advice subject to ERISA fiduciary duties, as well as covering advice related to non-securities products like index annuities and 401(k) plan menus. The final regulation also revises the process for determining when advice falls under ERISA’s fiduciary duties, focusing on situations where a reasonable investor would expect a trust and confidence relationship. The regulations also clarify that certain activities, like HR professionals providing education, are not covered. These changes aim to update regulations that haven’t kept pace with the evolving retirement landscape.