DOL Releases Final Rule to Update Definition of Investment Advice Fiduciary Under ERISA
The Department of Labor’s Employee Benefits Security Administration (EBSA) released its final rule entitled, “Retirement Security Rule: Definition of an Investment Advice Fiduciary”, which updates the definition of an investment advice fiduciary under ERISA and the Internal Revenue Code.
Specifically, the final rule and related amended prohibited transaction exemptions require trusted investment advice providers to give prudent, loyal, and honest advice free from overcharges. These fiduciaries must adhere to high standards of care and loyalty when recommending investments and avoid recommendations that favor the investment advice providers’ interests—financial or otherwise—at the retirement savers’ expense. Under the final rule and amended exemptions, financial institutions overseeing investment advice providers must have policies and procedures to manage conflicts of interest and ensure providers follow these guidelines.
The updated definition of an investment advice fiduciary takes effect on September 23, 2024 and applies when trusted financial services providers give compensated investment advice to retirement plan participants, individual retirement account owners and plan officials responsible for administering plans and managing their assets. Additional information about this final rule is available on the EBSA website here.
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