DOL Releases Fiduciary Exemption for Improving Investment Advice

​The Department of Labor (DOL) Employee Benefits Security Administration (EBSA) released final regulation Prohibited Transaction Exemption 2020-02, Improving Investment Advice for Workers & Retirees, aimed at investment advice fiduciaries. The prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 (ERISA) Title 1 and the Internal Revenue Code of 1986, as amended (IRC) generally prohibit fiduciaries of plans including workplace retirement plans (Plans) and individual retirement accounts and annuities (IRAs), from engaging in self-dealing and receiving compensation from third parties in connection with transactions involving Plans and IRAs. 

This rule creates a new transaction class exemption for investment professionals and advisors such as registered investment advisers, broker-dealers, banks, insurance companies, and their affiliates, requiring them to plainly tell retirement investors, such as participants, beneficiaries, and IRA owners, that they are acting as fiduciaries and they must act in the retirement investors’ best interest even if they receive compensation on such transactions.

The exemption also applies to situations when participants roll over plan assets to IRAs and when rollover advice could be considered fiduciary advice under ERISA and the IRC.

 

 

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