Department of Labor Investment Advice

Recently, the DOL sent to the OMB the proposed Fiduciary Advice Rule.  An understanding of when a firm and its representatives provide investment advice and thus act as fiduciaries is important.

In the case of a Plan, the fiduciary is subject to the fiduciary provisions of Section 404 of ERISA and the prohibited transaction provisions of Section 406 of ERISA and Section 4975(c)(1) of the Code.  The rule when finalized would reinstate the DOL’s 5-part test for Investment Advice.  This is outlined and discussed in the attached article by the Groom Law Group.

If an advisor is deemed to be a fiduciary in regard to a qualified plan or IRA, the proposed class exemption would allow investment advice fiduciaries to provide a wider range of retirement options so long as they abide by the DOL’s Impartial Conduct Standards as outlined in the article.  These standards align with those found in the Securities and Exchange Commission’s Regulation Best Interest (Reg BI), which went into effect on June 30, 2020.

In conclusion, as stated in the article, the Exemption is another significant development in the DOL’s quest to exercise greater influence over firms and their representatives to assure that they make recommendations that are in the best interest of Plan participants and IRA holders.