Tag: Fiduciary duties

Five-Part Fiduciary Test Is Back: Update Financial Advisory Agreements Now

On March 20, 2026, the Department of Labor published a vacatur notice (FR Doc. 2026-05492, 91 FR 13503–13510) officially removing the 2024 Retirement Security Rule from the Code of Federal Regulations. The DOL’s Employee Benefits Security Administration has restored the longstanding 1975 five-part test for determining investment advice fiduciary status under ERISA and IRC § 4975, and has stated it has no plans to pursue new rulemaking on this topic. If you updated your advisory or service agreements to acknowledge an expanded fiduciary standard under the 2024 rule, those provisions now reference a legal standard that no longer exists. Agreements should be updated accordingly.

What Changed

The 2024 Retirement Security Rule would have significantly broadened the definition of an investment advice fiduciary. Under that rule, a single rollover recommendation—or any recommendation made in a position of trust—could have established ERISA fiduciary status, even without a continuing advisory relationship. Many advisers updated their service agreements, fiduciary acknowledgment letters, and client-facing disclosures to reflect this broader standard.

That rule was vacated by federal courts in Texas (Eastern District, March 12, 2026; Northern District, March 17, 2026). The DOL’s March 20 Federal Register notice formally removed the rule from the CFR. The operative standard is now, once again, the 1975 five-part test. This conclusion rests on the published vacatur notice (Final Rule) and EBSA’s confirmation that no replacement rulemaking is planned.

The Restored Five-Part Test

Under the reinstated 1975 regulation (29 CFR § 2510.3-21, as restored), a person is an investment advice fiduciary only if all five elements are met: (1) the person renders advice on the value of securities or other property, or makes investment recommendations; (2) on a regular basis; (3) pursuant to a mutual agreement, arrangement, or understanding; (4) that the advice will serve as a primary basis for investment decisions; and (5) that the advice will be individualized to the plan’s particular needs.

The practical significance for advisers: one-time rollover recommendations and isolated investment guidance generally do not satisfy the “regular basis” and “mutual agreement” prongs. Activities that the 2024 rule would have swept into fiduciary status—such as a single IRA rollover recommendation—may now fall outside fiduciary status under the restored test.

Why Your Agreements Need Attention

If your current service or advisory agreements contain language acknowledging fiduciary status for activities that only triggered fiduciary duties under the now-vacated 2024 rule, those contractual provisions may be creating obligations that the law no longer imposes. A contractual fiduciary acknowledgment can establish fiduciary status even when the underlying regulation does not require it. In other words, your agreement—not the regulation—becomes the source of your fiduciary duty, along with all the liability exposure that entails.

This is particularly relevant for advisers who provide rollover guidance, make one-time investment recommendations, or offer plan-level services that do not involve ongoing individualized advice to participants.

Recommended Action Items

  1. Review all current advisory and service agreements. Identify any language added in 2024 or 2025 to comply with the Retirement Security Rule—particularly provisions acknowledging fiduciary status for rollover recommendations, one-time advice, or “positions of trust.”
  2. Update fiduciary acknowledgment letters. If you revised acknowledgment letters to reflect the broader 2024 standard, revert to language consistent with the five-part test. Ensure fiduciary acknowledgments are limited to relationships that actually satisfy all five elements.
  3. Revisit rollover documentation and disclosures. Rollover recommendation processes that were expanded to satisfy the 2024 rule’s requirements (including PTE 2020-02 compliance steps tied to the vacated rule) should be reassessed. Advisers may choose to retain best-practice documentation voluntarily, but should not contractually bind themselves to a standard the law no longer requires.
  4. Coordinate with plan sponsor clients. Plan sponsors who engaged you under agreements reflecting the 2024 fiduciary standard should be informed of the reversion. Committee charters and investment policy statements referencing the vacated rule should also be updated.

Department of Labor Adds Self-Correction to Voluntary Fiduciary Correction Program

The Department of Labor (DOL) published significant updates to its Voluntary Fiduciary Correction Program (VFCP) on January 15, 2025. These updates are designed to make it easier for employers and plan fiduciaries to avoid potential DOL civil enforcement and penalties if they voluntarily correct certain fiduciary breaches.

Key Changes – Addition of Self-Correction Features

The updated VFCP adds two new self correction categories, which better align the DOL’s VFCP with the IRS’s Employee Plans Compliance Resolution System (EPCRS), so that common issues subject to correction under both programs (to gain relief from both IRS and DOL enforcement) can be now be self-corrected. Previously, many failures that could be self-corrected under the IRS’s EPCRS required a formal VFCP application.

New Self-Correction Tool for Delinquent Contributions and Loan Payments

The most significant update to the VFCP is the introduction of a new self-correction tool, which employers and other plan officials can use to remedy delays in transmitting participant contributions and participant loan repayments to retirement plans. These are the most common fiduciary breaches requiring correction under both EPCRS and VFCP.

The VFCP imposes six broad requirements for self-correction of delinquent participant contributions or loan repayments involving retirement plans:

1. $1,000 Earnings Limit. The amount of Lost Earnings on the delinquent participant contributions or loan repayments must be $1,000 or less

2. 180 Limit. The delinquent participant contributions or loan repayments must have been remitted to the plan within 180 calendar days from the date of withholding from participants’ paychecks or receipt by the employer.

3. Lost Earnings Calculation Requirement. The Lost Earnings must be calculated using the DOL online calculator, starting from the “Date of Withholding or Receipt” (NOT from the earliest date the contributions could have been made to the plan)

4. SCC Notice Electronic Filing. The employer or other self-corrector must electronically file a Self-Correction Component Notice with the DOL, which must include: 

  • the name and an email address for the self-corrector;
  • the plan name; 
  • the plan sponsor’s nine-digit employer identification number (EIN);
  • the plan’s three-digit number (PN); 
  • the Principal Amount; 
  • the amount of Lost Earnings and the date paid to the plan; 
  • the Loss Date (for purposes of the SCC, the Date(s) of Withholding or Receipt); and 
  • the number of participants affected by the correction. 

5. Penalty of Perjury Statement. A plan fiduciary with knowledge of the transaction that is being self-corrected and each Plan Official seeking relief under the program must sign a penalty of perjury statement.

6. Self-Correction Checklist and Document Retention. Self-correctors must prepare a SCC Retention Record Checklist and collect a list of documents, and provide the completed checklist and required documentation to the plan administrator. The checklist and documents include:

  • A brief statement explaining why the employer retained the participant contributions or loan repayments instead of timely forwarding such amounts to the plan;
  • Proof of payment, showing the actual date the plan received the corrective payment;
  • Lost Earnings printout from the DOL online Calculator;
  • A statement describing policies and procedures (if any) that the employer put into place to prevent future delinquencies of participant contributions or loan repayments;
  • A copy of the SCC Notice Acknowledgement and Summary page received from EBSA after electronic submission of the SCC notice; and
  • The required Penalty of Perjury statement

Also Note: Self-correction does not relieve plans from reporting delinquent participant contributions on the plan’s Form 5500 or Form 5500-SF, as applicable.

Self-Correction for Certain Participant Loan Failures Self-Corrected Under the Internal Revenue Service’s Employee Plans Compliance Resolution System (EPCRS.)

The updated VFCP also adds a new Self-Correction Component for participant loan failures, which allows self-correction of the following transactions, provided that they are eligible for, and have been self-corrected under, the IRS’s EPCRS:

  • Loans, the terms of which did not comply with plan and Code provisions concerning amount, duration, or level amortization, or loans that defaulted due to a failure to withhold loan repayments from the participant’s wages;
  • The failure to obtain spousal consent for a plan loan;
  • Loans that exceed the number permitted under the terms of the plan; and
  • Any eligible inadvertent failure relating to a participant loan that is self-corrected in accordance with EPCRS

Other VFCP Changes

The updated VFCP makes some additional changes, that will make it easier for employers to use the program, including

Expanded Scope of Eligible Transactions: The VFCP now covers a wider range of transactions that can be corrected. This includes transactions that were previously ineligible, such as certain types of excess contributions.

Clarification of Existing Corrections: The DOL has clarified the types of transactions that are already eligible for correction under the VFCP. This will help employers and plan officials determine whether they can take advantage of the program.

Simplified Procedures: The DOL has simplified the administrative and procedural requirements for using the VFCP. This will make it easier and less time-consuming for employers and plan officials to correct fiduciary breaches.

Updated Class Exemption: The DOL has amended the VFCP class exemption to reflect the changes to the program.

The updated VFCP goes into effect on March 17, 2025.

Presence Not Required – IRS Extends Remote Signature Procedures for Qualified Plans

The IRS has extended temporary relief allowing plan representatives to witness participant elections or spousal waivers via videoconference until June 30, 2021. 

The IRS initially provided relief from the physical presence requirement from January 1, 2020 through December 31, 2020 in IRS Notice 2020-42 in response to the COVID-19 related social distancing restrictions. On December 22, 2020, the IRS extended that relief through June 30, 2020 through IRS Notice 2021-03.

The relief provides that participant elections required to be witnessed by a plan representative or notary public, including spousal consent, may be satisfied using alternative procedures that do not require physical presence. For a participant election witnessed by a notary public, the physical presence requirement is deemed satisfied with remote notarization using live audio-video technology that satisfies certain requirements. For a participant or spousal election witnessed by a plan representative, the physical presence requirement is deemed satisfied if an audio-video system is used that satisfies the following requirements:

  1. The individual signing the election presents a valid photo ID to the plan representative during the videoconference (transmitting the ID before or after the videoconference is not good enough);
  2. The video conference is live and allows direct interaction between the participant and plan representative;
  3. The individual faxes or electronically transmits a legible copy of the signed document to the plan representative on the same day it is signed; and
  4. After receiving the signed document, the plan representative acknowledges that the signature has been witnessed by the plan representative and transmits the signed document, including the acknowledgement, back to the individual using an electronic medium the individual can easily access.

Notice 2021-03

DOL Final Rule Facilitates Retirement Plan Electronic Disclosures

The U.S. Department of Labor (DOL) published a final rule on May 27, 2020 that will allow employers to post retirement plan disclosures online or deliver them to employees by email, as a default. The DOL believes this will make it easier for employers to furnish retirement plan disclosures electronically, reducing administrative expenses and making disclosures more readily accessible and useful for employees.

Background

There are approximately 700,000 retirement plans covered by ERISA, covering approximately 137 million participants. ERISA-covered retirement plans must furnish multiple disclosures each year to participants and beneficiaries. The number of disclosures per year depends on the specific type of retirement plan, its features, and for defined benefit plans, the plan’s funding status.

Delivery methods for ERISA disclosures must be reasonably calculated to ensure that workers actually receive the disclosures. To deliver disclosures electronically, plan administrators previously had to rely on a regulatory safe harbor established by the DOL in 2002. See 29 CFR 2520.104b-1(c).

On August 31, 2018, the President issued Executive Order 13847, directing the DOL to review whether regulatory or other actions could be taken to make retirement plan disclosures more understandable and useful for participants and beneficiaries and to focus on reducing the costs and burdens that retirement plan disclosures impose on employers and others responsible for their production and distribution. The Order specifically emphasized that this review include an exploration of the potential for broader use of electronic delivery as a way to improve the effectiveness of the disclosures and to reduce their associated costs and burdens.

New Voluntary Safe Harbor

The new electronic disclosure rule establishes a new, voluntary safe harbor for retirement plan administrators who want to use electronic media, as a default, to furnish covered documents to covered individuals, rather than sending potentially large volumes of paper documents through the mail. The new safe harbor permits the following two optional methods for electronic delivery:

  1. Website Posting. Plan administrators may post covered documents on a website if appropriate notification of internet availability is furnished to the electronic addresses of covered individuals.
  2. Email Delivery. Alternatively, plan administrators may send covered documents directly to the electronic addresses of covered individuals, with the covered documents either in the body of the email or as an attachment to the email.

Retirement plan administrators who comply with the safe harbor will satisfy their statutory duty under ERISA to furnish covered documents to covered individuals. The safe harbor is limited in the following respects:

Limited Scope of the New Safe Harbor

The safe harbor is limited to retirement plan disclosures.

A plan administrator may use this safe harbor only for “covered individuals.” To be a covered individual, the person must be entitled under ERISA to receive covered documents and must have a valid electronic address (e.g., email address or smart phone number).

The new safe harbor does not supersede the 2002 safe harbor; the 2002 safe harbor remains in place as another option for plan administrators.

Protections for Plan Participants

The new safe harbor includes a variety of protections for covered individuals, including:
1. Right to Paper. Covered individuals can request paper copies of specific documents, or globally opt out of electronic delivery entirely, at any time, free of charge.

2. Initial Notification. Covered individuals must be furnished an initial notification, on paper, that the way they currently receive retirement plan disclosures (e.g., paper delivery in the US mail) is changing. The notice must inform them of the new electronic delivery method, the electronic address that will be used, and the right to opt out if they prefer paper disclosures, among other things. The notice must be given to them before the plan may use the new safe harbor.

3. Notifications of Internet Availability. Covered individuals generally must be furnished a notice of internet availability (NOIA) each time a new covered document is made available for review on the internet website.

To avoid “notice overload,” the final rule permits an annual NOIA to include information about multiple covered documents, instead of multiple NOIAs throughout the year.

The NOIA must briefly describe or identify the covered document that is being posted online, include an address or hyperlink to the website, and inform the covered individual of the right to request paper copies or to opt out of electronic delivery altogether.

The NOIA must be concise, understandable, and contain only specified information.

4. Website Retention. Covered documents must remain on an internet website until superseded by a subsequent version, but in no event for less than one year.

5. System Check for Invalid Electronic Addresses. Plan administrators must ensure that the electronic delivery system is designed to alert them if a participant’s electronic address is invalid or inoperable. In that case, the administrator must attempt to promptly cure the problem, or treat the participant as opting out of electronic delivery.

6. System Check at Termination of Employment. When someone leaves their job, the plan administrator must take steps to ensure the continued accuracy and operability of the person’s employer-provided electronic address.

Effective Date & Immediate Availability

The new safe harbor is effective July 27, 2020 (60 days after its publication in the Federal Register). However, the DOL, as an enforcement policy, will not take any enforcement action against a plan administrator that relies on this safe harbor before that date.

Erwin Kratz Discusses Fiduciary Compliance for Plan Sponsors

ERISA Benefits Law attorney Erwin Kratz was a panelist on “ERISA Principles That Every Plan Fiduciary Needs to Know”, presented by Wellspring Financial Partners on February 19, 2020. Erwin joined Eric Dyson of Wellspring, who discussed the four main fiduciary duties – the duties of Loyalty, of Prudence, to Diversify Plan Assets and to Follow the Plan Documents.

Erwin then provided practical tips for fiduciary compliance by discussing four points of impact when the “fiduciary rubber” most frequently hits the road:

  • When Restating your Plan
  • Top Three Mistakes a Committee Can Make
  • How to be a Good Committee Member; and
  • Working with your Non-Fiduciary Administrative Staff

View the YouTube video here:

And download a copy of the PowerPoint Presentation here:

ERISA Benefits Law Wellspring Financial Partners Fiduciary Presentation- February 2020Download

PBGC’s Expanded Missing Participant Program Final Rule Covers DC Plans and non-PBGC Insured DB Plans

As authorized by the Pension Protection Act of 2006 (PPA), the Pension and Benefit Guarantee Corporation (PBGC) has issued a final regulation that expands PBGC’s missing participants program, effective as of plan terminations that occur on or after January 1, 2018. PBGC’s missing participant program was previously limited to terminated single-employer DB plans covered by title IV’s insurance program. It is now available to other terminated retirement plans.

Summary of How the PBGC MIssing Participant Program Applies to Defined Contribution (DC) Plans and non-PBGC Defined Benefit Plans

The revised program now provides that PBGC’s missing participants program is voluntary for terminated non-PBGC-insured plans, e.g.,DC plans.

In addition, a non-PBGC-insured plan that chooses to use the program may elect to be a “transferring plan” or a “notifying plan.” A transferring plan sends the benefit amounts of missing distributees to PBGC’s missing participants program. A notifying plan informs PBGC of the disposition of the benefits of one or more of its missing distributees. Section 4050(d)(1) of ERISA permits but does not require non-PBGC-insured plans covered by the program to turn missing participants’ benefits over to PBGC.

A DC plan that chooses to participate in the missing participants program and elects to be a transferring plan must transfer the benefits of all its missing participants into the missing participants program. PBGC explains that this is to prevent the possibility of “cherry-picking”—that is, selective use of the missing participants program—by transferring plans.

PBGC will charge a one-time $35 fee per missing distributee, payable when benefit transfer amounts are paid to PBGC. There will be no charge for amounts transferred to PBGC of $250 or less. There will be no charge for plans that only send to PBGC information about where benefits are held (such as in an IRA or under an annuity contract). Fees will be set forth in the program’s forms and instructions.

The program definition of “missing” for DC plans follows Department of Labor regulations, which treat DC plan distributees who cannot be found following a diligent search similar to distributees whose whereabouts are known but who do not elect a form of distribution.

A distributee is treated as missing if, upon close-out, the distributee does not accept a lump sum distribution made in accordance with the terms of the plan and, if applicable, any election made by the distributee. For example, if a check issued pursuant to a distributee’s election of a lump sum remains uncashed after the last date prescribed on the check or an accompanying notice (e.g., by the bank or the plan) for cashing it (the “cash-by” date), the distributee is considered not to have accepted the lump sum.

A DC plan must search for each missing distributee whose location the plan does not know with reasonable certainty. The plan must search in accordance with regulations and other applicable guidance issued by the Secretary of Labor under section 404 of ERISA. See the DOL’s FAB 2014-01 for guidance on search steps. Compliance with that guidance satisfies PBGC’s “diligent search” standard for DC plans.

Some other major features of the new program include:

  • A unified unclaimed pension database of information about missing participants and their benefits from terminated DB and DC plans.
  • A centralized, reliable, easy-to-use directory through which persons who may be owed retirement benefits from DB or DC plans could find out whether benefits are being held for them.
  • Periodic active searches by PBGC for missing participants.
  • Fewer benefit categories and fewer sets of actuarial assumptions for DB plans determining the amount to transfer to PBGC and a free on-line calculator to do certain actuarial calculations.

Visit the PBGC’s Missing Participant site for more information, including an explanation of the plans covered by the program and the forms and instructions to use with the program.

Our prior post on the proposed regulations is here

9th Circuit Clarifies Service Provider’s Fiduciary Duties When Negotiating Fees and When Withdrawing Fees from Plan Assets

The Ninth Circuit Court of Appeals has issued an opinion in Santomenno v. Transamerica LLC, clarifying the circumstances under which a retirement plan investment service provider breaches (and does not breach) its fiduciary duties when negotiating its fees and when collecting the agreed fees from plan accounts.

The Case

The trial court in this case held that the plan investment service provider breached its fiduciary duties to plan beneficiaries first when negotiating with the employer about providing services to the plan and later when withdrawing predetermined fees from plan funds.

The 9th Circuit held that a plan administrator is not an ERISA fiduciary when negotiating its compensation with a prospective customer. The employer/plan sponsor doing the hiring is acting under a fiduciary duty when it negotiates these fees. Therefore, the prospective service provider did not breach its duties in negotiating for the fees it wanted to receive.

The Court also held that the service provider was not a fiduciary with respect to its receipt of revenue sharing payments from investment managers after it became a service provider to the Plan because the payments were fully disclosed before the provider agreements were signed and did not come from plan assets.

Finally, and most significantly, the Court held that the service provider also did not breach its fiduciary duty with respect to its withdrawal of the preset fees from plan funds. The Court concluded that when a service provider’s definitively calculable and nondiscretionary compensation is clearly set forth in a contract with the fiduciary-employer, collection of those fees out of plan funds in strict adherence to that contractual term is not a breach of the provider’s fiduciary duty. The withdrawal of its fees in such circumstances is a ministerial act that does not give rise to fiduciary liability.

The Take-Aways

This case highlights the importance of the fiduciary role played by the plan sponsor and administrator when hiring service providers to the Plan. Hiring and retention decisions are fiduciary acts on the part of the employer/plan sponsor, but are not fiduciary acts on the part of the service provider being hired.

In addition, while this case illustrates that it is not always a fiduciary act for a service provider to withdraw its fees directly from plan assets, that is not true in every case. For example, if the Plan sponsor or administrator disputed a charge before the service provider withdrew its fees, or if the fees withdrawn by the service provider were based on hours worked or some other non-ministerial measure of the service provided, the withdrawal may not be ministerial. This case therefore does not give service providers free reign to withdraw fees from plan assets without consideration of their fiduciary duties.

Santomenno v. Transamerica LLC

DOL Issues Additional Fiduciary Rule Enforcement Relief and FAQ Guidance

The DOL has issued temporary enforcement relief and FAQ guidance addressing the implementation of the DOL’s final fiduciary rule on investment advice conflicts and related prohibited transaction exemptions (PTEs) during the transition period beginning June 9, 2017 and ending January 1, 2018.

As background, the fiduciary rule and PTEs were effective June 7, 2016, with an initial applicability date of April 10, 2017. The applicability date was delayed 60 days to June 9, 2017. See our prior article here. In connection with the delay, the DOL amended the Best Interest Contract (BIC) exemption and the PTEs to provide transition relief that only requires adherence to the impartial conduct standards (including the best interest standard) through January 1, 2018.The standards specifically require advisers and financial institutions to:

(1) Give advice that is in the “best interest” of the retirement investor. This best interest standard has two chief components: prudence and loyalty:

  • Under the prudence standard, the advice must meet a professional standard of care as specified in the text of the exemption;
  • Under the loyalty standard, the advice must be based on the interests of the customer, rather than the competing financial interest of the adviser or firm;

(2) Charge no more than reasonable compensation; and

(3) Make no misleading statements about investment transactions, compensation, and conflicts of interest.

Highlights of the most recent transition guidance:

Temporary Enforcement Policy on Fiduciary Duty Rule (FAB 2017-02). The DOL announced on May 22, 2017 that it will not pursue claims during the transition period against fiduciaries who are “working diligently and in good faith” to comply with the new fiduciary rule and the related exemptions. The DOL also states that IRS confirms that FAB 2017-02 constitutes “other subsequent related enforcement guidance” for purposes of IRS Announcement 2017-4, which means that the IRS will not impose prohibited transaction excise taxes or related reporting obligations on any transactions or agreements during the transition period that would be subject to the DOL’s nonenforcement policy.

DOL FAQ Guidance on the Transition Period. The DOL also issued FAQs, which review the DOL’s “phased implementation approach”, and confirm that on June 9, 2017, firms and advisers who are fiduciaries need to alter their compensation practices to avoid PTEs or satisfy the transition period requirements under the BIC or another exemption. During the transition, firms should adopt policies and procedures they “reasonably conclude” are necessary to ensure that advisers comply with the impartial conduct standards. However, there is no requirement to give investors any warranty of their adoption, and those standards will not necessarily be failed if certain conflicts of interest continue during the transition period. Other highlights include a clarification that level-fee providers can rely on the BIC exemption during the transition period, and examples of participant communications and non-client-specific investment models that do not provide fiduciary advice. The guidance also indicates that the President’s mandated review (see our prior article here) has not been completed, but when it is, additional changes might be made to the rule or the PTEs.

DOL Delays Fiduciary Duty Rule for 60 Days and Invites Comments on Whether to Further Delay, Amend, or Withdraw the Rule

The U.S. Department of Labor (DOL) today announced a proposed extension of the applicability dates of the fiduciary rule and related exemptions, including the Best Interest Contract Exemption, from April 10 to June 9, 2017.

The announcement follows a presidential memorandum issued on Feb. 3, 2017, which directed the DOL to examine the fiduciary rule to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice. See our prior post, which explained that the President’s memorandum

..instructs the DOL to rescind or revise the rule . . . if it concludes for any other reason after appropriate review that the Fiduciary Duty Rule is inconsistent with the Administration’s stated priority “to empower Americans to make their own financial decisions, to facilitate their ability to save for retirement and build the individual wealth necessary to afford typical lifetime expenses, such as buying a home and paying for college, and to withstand unexpected financial emergencies”.

The DOL’s latest announcement invites comments that might help inform updates to the legal and economic analysis it conducted in originally issuing the rule (during President Obama’s term), including any issues the public believes were inadequately addressed in the prior analysis. The DOL has also invited comments on market responses to the final rule and the related Prohibited Transaction Exemptions (PTEs) to date, and on the costs and benefits attached to such responses. The comment period runs 45 days from today.

Upon completion of its examination, the DOL may decide to allow the
final rule and PTEs to become applicable, issue a further extension of the applicability date, propose to withdraw the rule, or propose amendments to the rule and/or the PTEs.

President Orders Review of Fiduciary Duty Rule

On February 3, 2017, the President issued a Presidential Memorandum on the Fiduciary Duty Rule, ordering the Department of Labor (DOL) to “examine the Fiduciary Duty Rule to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice”.

DOL Review

The memorandum directs the DOL to “prepare an updated economic and legal analysis concerning the impact of the Fiduciary Duty Rule”, considering whether the rule:

  • has harmed or is likely to harm investors due to a reduction in access to certain retirement savings offerings, retirement product structures, retirement savings information, or related financial advice;
  • has resulted in dislocations or disruptions within the retirement services industry that may adversely affect investors or retirees; or
  • is likely to cause an increase in litigation, and an increase in the prices that investors and retirees must pay to gain access to retirement services.

Possible Revision or Rescission

The memorandum also instructs the DOL to rescind or revise the rule if it makes an affirmative determination as to any of the above considerations, or if it concludes for any other reason after appropriate review that the Fiduciary Duty Rule is inconsistent with the Administration’s stated priority “to empower Americans to make their own financial decisions, to facilitate their ability to save for retirement and build the individual wealth necessary to afford typical lifetime expenses, such as buying a home and paying for college, and to withstand unexpected financial emergencies”.

Possible Delay

While the Memorandum does not directly delay the rule, the acting U.S. Secretary of Labor, Ed Hugler, responded to the President’s direction through a News Release stating that “The Department of Labor will now consider its legal options to delay the applicability date as we comply with the President’s memorandum.”

While it is still unclear whether the DOL will delay the rule, it is entirely possible, likely even, that the DOL will delay the rule within the next few weeks. It is also a good bet that the DOL will ultimately make some revisions to the rule, even if they do not rescind it entirely. In the meantime, financial advisors and others subject to the Rule will need to evaluate their compliance efforts so that they remain as nimble as possible in the face of he constantly shifting regulatory sands.

Plan Sponsors and Plan Administrators should note that neither the Fiduciary Duty Rule, nor the potential impending changes to the rule, directly impact their responsibilities as plan fiduciaries, other than how the rule impacts those providing financial advice to Plan Sponsors and Administrators.

More:

DOL Conflict of Interest Final Rule Page