On April 25, 2024, with the enactment of the final version of its Retirement Security Rule (the “Final Rule”), the Department of Labor (“DOL”) imposed a fiduciary standard under the Employee Retirement Income Security Act of 1974 (“ERISA”) that it believes will “uniformly apply to all investment advice that is provided to [retirement investors], concerning the investment of their retirement assets.”
Under the DOL’s prior 1975 fiduciary rule (“1975 Rule”), a five-part test (the “1975 Test”) was used to determine when an investment advice provider is also an ERISA fiduciary. The 1975 Test became problematic as the marketplace evolved for retired investors and allowed investment professionals to bypass ERISA’s fiduciary safeguards. To address the 1975 Test’s problems and other exemptions, the DOL’s Final Rule provides an amended definition of “fiduciary” under Section 3(21)(a)(ii) of ERISA, as well as amendments to the prior Prohibited Transaction Exemptions 2020-20 (“PTE”),[1] PTE 84-24,[2] and eliminated the availability of other previously available exemptions.[3]
