DOL Submits New Fiduciary Rule for Review; Faces Fierce Resistance
The Department of Labor is facing strong opposition to its newly released proposal that “would amend the regulatory definition of the term fiduciary … [to] more appropriately define when persons who render investment advice for a fee to employee benefit plans and [individual retirement accounts] are fiduciaries.”
Late Friday, the agency submitted the proposal for review to the Office of Information and Regulatory Affairs within the White House’s Office of Management and Budget, which typically takes about 90 days.
The DOL has been pursuing the higher advice standard since the Obama administration in 2016, when a fiduciary rule that broadened the definition of a person or entity taking on fiduciary responsibilities and replaced a five-part test used to decide who was fit to serve as a fiduciary was proposed but later struck down in 2018 by a federal appeals court.
A similar, less rigid version of the rule was finalized in 2020 during the Trump administration, reinstating the five-part test and, later, finalizing a prohibited transaction exemption that allowed permitted investment-advice fiduciaries to receive compensation for more types of guidance.
Under the Biden administration, the DOL allowed Trump’s rule to continue but the new proposal includes significant expansion, so that it covers more financial advisors to retirement plans.
As The DI Wire reported in June 2023, the Department of Labor signaled earlier this year that issuing a new fiduciary rule was a “huge priority” for the agency. The DOL said it would, allegedly, ensure consistent protection of employee benefit plans and IRA investors.
Earlier this month, in a letter to Acting Labor Secretary Julie Su, various senior lawmakers urged the agency to cease any further action to amend the definition of investment advice fiduciary.
Wayne Chopus, president and chief executive officer of the Insured Retirement Institute released a statement on Saturday proclaiming that the new fiduciary proposal will “hurt working families’ ability to save for retirement.”
In connection with the new rule, the DOL is also expected to review available prohibited transaction class exemptions and propose amendments or new exemptions with the intention to ensure consistent protection of employee benefit plan and IRA investors.
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