Home News DOL Fiduciary Rule Takes Effect Today

DOL Fiduciary Rule Takes Effect Today

The Department of Labor’s Employee Benefits Security Administration has confirmed that its exemption for investment advice fiduciaries, dubbed Improving Investment Advice for Worker & Retirees, will take effect.

The Department of Labor’s Employee Benefits Security Administration has confirmed that its exemption for investment advice fiduciaries, dubbed Improving Investment Advice for Worker & Retirees, goes into effect today.

The Trump-era regulation replaces the previous iteration of the rule that was vacated by the Fifth Circuit Court of Appeals in 2018 for regulatory overreach and reinstates the Labor Department 1975 five-part test to determine who is a fiduciary.

“This exemption allows for important investor protections, including a stringent ‘best interest’ standard of care for fiduciary recommendations of rollovers from ERISA-protected retirement accounts,” said Deputy Assistant Secretary of Labor for the Employee Benefits Security Administration Ali Khawar.

The rule states that the best interest standard in the exemption is “broadly aligned” with the Securities and Exchange Commission’s Regulation Best Interest, which went into effect on June 30, 2020.

“We recognize that investment advice providers have been preparing for the exemption, and this step will allow them to implement important system changes. That said, we will continue our stakeholder outreach to determine how we might improve this exemption, the rule defining who is an investment advice fiduciary, and related exemptions to build on this approach,” added Khawar.

The temporary enforcement policy (Field Assistance Bulletin 2018-02) will remain in place until December 20, 2021.

In the FAB, the DOL stated it would not pursue prohibited transaction claims against investment advice fiduciaries who worked “diligently and in good faith” to comply with impartial conduct standards for transactions that would have been exempted in the new exemptions, or treat the fiduciaries as violating the prohibited transaction rules.

The impartial conduct standards have three components: A best interest standard; a reasonable compensation standard; and a requirement to make no misleading statements about investment transactions and other relevant matters.

In the coming days, the agency plans to publish related guidance for retirement investors, employee benefit plans and investment advice providers.

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