In late June 2020, the DOL released a press release and series of related proposals and actions designed to readdress the long festering issue of the status of people and firms providing investment advice related to ERISA investments. According to the June 29th Press Release, the DOL "announced that it is proposing a new exemption for investment advice fiduciaries. The Department’s actions today will benefit American workers and retirees by delivering more choices for their financial future with clear standards to be upheld by investment advice providers. The proposed exemption will be published in the Federal Register for notice and comment in the near future.
"The proposed exemption offers a new prohibited transaction class exemption for investment advice fiduciaries and is based on an existing temporary policy adopted after the 5th Circuit Court of Appeals vacated the Department’s 2016 fiduciary rule package. The proposal would allow investment advice fiduciaries to give more choices for retirement using Impartial Conduct Standards. Impartial Conduct Standards are a best interest standard; a reasonable compensation standard; and a requirement to make no materially misleading statements. Since the 5th Circuit’s ruling in 2018, the Securities and Exchange Commission (SEC) has issued a package of advice standards. The standards in the Department’s proposed exemption announced today align with standards of other regulators, including the SEC. Together, the actions of the SEC and the Department of Labor will strengthen retirement security for Americans.
"The proposed exemption also expresses the Department’s views on when rollover advice could be considered fiduciary advice under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code.
"The Department is also taking the ministerial action of amending the Code of Federal Regulations to implement the 5th Circuit’s order. The court’s order had the effect of reinstating the Department’s 1975 regulation defining who is an investment advice fiduciary under ERISA and the Code, commonly known as the “five-part test.” The court’s order also had the effect of reinstating the Department’s Interpretive Bulletin 96-1 regarding participant investment education."
Several law firms have provided extensive overviews and commentaries on the actions.
Resources and reference materials
Department of Labor Materials
- Press Release, dated June 29, 2020
- Fact Sheet: Improving Investment Advice for Workers & Retirees--provides a thorough overview of the actions proposed
Law Firm Materials