Department of Labor Issues Final Fiduciary Rule

On April 23, 2024, the Department of Labor (DOL) released the final Retirement Security Rule: Definition of an Investment Advice Fiduciary, which was proposed in October 2023. The final rule defines who an investment advice fiduciary is for the purposes of the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code and will go into effect on or about September 23, 2024.

Under the final rule, a person is an investment advice fiduciary if they provide a recommendation in one of the following contexts:

• The person either directly or indirectly (e.g., through or together with any affiliate) makes professional investment recommendations to investors on a regular basis as part of their business and the recommendation is made under circumstances that would indicate to a reasonable investor in like circumstances that the recommendation:
  • is based on review of the retirement investor’s particular needs or individual circumstances,
  • reflects the application of professional or expert judgment to the retirement investor’s particular needs or individual circumstances, and
  • may be relied upon by the retirement investor as intended to advance the retirement investor’s best interest; or
• The person represents or acknowledges that they are acting as a fiduciary under Title I of ERISA, Title II of ERISA, or both with respect to the recommendation. The recommendation also must be provided “for a fee or other compensation, direct or indirect” as defined in the final rule.

The updated rule would scope in recommendations to roll over assets from a workplace plan into an IRA, purchase of retirement annuities such as fixed indexed annuities, and recommendations of other investments that may not already be covered by SEC’s Regulation Best Interest (such as real estate, certain certificates of deposit, and other bank products). The DOL also included amendments to prohibited transaction exemptions (PTEs) available to investment advice fiduciaries, including PTE 2020-02, "Improving Investment Advice for Workers & Retirees."

Fidelity is reviewing this most recent rule and its impact on plans and will provide more information in the upcoming weeks. We will continue to provide information on industry efforts, regulatory updates, and guidance as they become available.