DOL Issues Proposed Retirement Security Rule on Definition of an Investment Advice Fiduciary; Comments Due January 2

Published November 16, 2023

The U.S. Department of Labor has posted the hearing agenda containing the panel compositions and presentation times for December 12-13. The announcement specifies that registration is required to view the online hearing.

(Updated December 8, 2023)


The U.S. Department of Labor has announced that it will hold an online hearing on the Notice of Proposed Rulemaking, “Retirement Security Rule: Definition of an Investment Advice Fiduciary,” and the associated prohibited transaction exemptions. The virtual public hearing will be held on December 12 through December 13, 2023, and will continue (if necessary) on December 14, 2023, beginning each day at 9 a.m. EST. Requests to testify at the hearing must be submitted by November 29, 2023. 

EBSA will organize the hearing into several moderated panels. Presenters will be given 10 minutes to testify, and they should be prepared to answer questions regarding their testimony. EBSA may limit the number of presenters based on how many testimony requests it receives. In that event, EBSA will ensure that the broadest array of viewpoints on all aspects of the proposals are represented and will include in the public record all testimony requests it receives.  

The hearing will be transcribed.

(Updated November 16, 2023)


The U.S. Department of Labor (DOL) released a proposed rule defining who is an investment advice fiduciary for purposes of the Employee Retirement Income Security Act (ERISA). DOL also released proposed amendments to class prohibited transaction exemptions (PTEs) available to investment advice fiduciaries.

DOL is proposing the new definition of an investment advice fiduciary to better protect retirement investors who make decisions about their retirement savings based on advice they receive. DOL is also proposing amendments to prohibited transaction exemptions available to investment advice fiduciaries so that fiduciaries who use them must follow consistent and protective compliance requirements, including an obligation to act in retirement investors' best interest.

Definition of Investment Advice Fiduciary
DOL proposes that a financial services provider would be an investment advice fiduciary under federal pension law if:
  • The provider provides investment advice or makes an investment recommendation to a retirement investor,
  • The advice or recommendation is provided for a fee or other compensation, and
  • The financial services provider makes the recommendation in the context of a professional relationship in which an investor would reasonably expect to receive sound investment recommendations that are in their best interest:
    • The provider has discretion over investment decisions for the retirement investor;
    • The provider makes investment recommendations to investors on a regular basis as part of their business, and the recommendation is provided under circumstances indicating that the recommendation is based on the particular needs or individual circumstances of the retirement investor and may be relied upon by the retirement investor as a basis for investment decisions that are in the retirement investor's best interest; or
    • The provider states that they are acting as a fiduciary when making investment recommendations.
The proposed fiduciary definition would apply to recommendations to roll over assets from a workplace retirement plan to an IRA if every element of the proposed fiduciary definition is satisfied.

Prohibited Transaction Exemptions
DOL proposes amendments to several existing PTEs to ensure all retirement investors receive the same quality investment advice, regardless of the product or service they receive. DOL would make two exemptions available for the management of conflicts of interest with respect to advice. Fundamental to both exemptions is the requirement that investment recommendations adhere to Impartial Conduct Standards.

 

  • The proposed amendment to PTE 2020-02 would be broadly available for advice with respect to the wide universe of investments recommended to retirement investors. The proposed amendment would make clarifying changes that build on the existing exemption conditions to provide more certainty for fiduciary investment advice providers and more protection for retirement investors.
  • The proposed amendment to PTE 84-24 would be tailored for use by independent insurance agents and is intended to facilitate their ability to make best interest recommendations under their business model. 

 

DOL also proposes amendments to several existing PTEs (75-1, 77-4, 80-83, 83-1, and 86-128) that currently provide relief for certain transactions, including in connection with investment advice. The proposed amendments would remove fiduciary investment advice transactions from the covered transactions in each exemption and make certain other administrative changes. As a result of the amendments, all investment advice fiduciaries would be held to the same conduct standards in administrative exemptions, because they would have to rely on PTE 2020-02 or PTE 84-24 to receive compensation that otherwise would be prohibited in connection with investment advice transactions.

Comments are due January 2, 2024.

DOL anticipates holding a public hearing approximately 45 days following the date of publication in the Federal Register. Specific information regarding the date, location, and submission of requests to testify will be published in the Federal Register. DOL proposes to make the final amendment effective 60 days after it is published in the Federal Register.

Additional Resources

Dedicated Retirement Security Resource Page 
Fact Sheet
News Release

(Posted November 1, 2023)