Today, the U.S. Department of Labor will release its highly-anticipated Final Rule and Exemptions addressing when a person providing investment advice with respect to an employee benefit plan or individual retirement account is considered to be a “fiduciary” under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. According to a Fact Sheet released in advance of the new rule’s publication, the “DOL has streamlined and simplified the rule to minimize the compliance burden and ensure ongoing access to advice, while maintaining an enforceable best interest standard that protects savers.” According to the Fact Sheet:

  • The rule requires more retirement investment advisers to put their client’s best interest first, by expanding the types of retirement advice covered by fiduciary protections
  • The rule clarifies what does and does not constitute fiduciary advice
  • The exemptions will allow firms to accept common types of compensation – like commissions and revenue sharing payments – if they commit to putting their client’s best interest first
  • The rule and exemptions ensure that advisers are held accountable to their clients if they provide advice that is not in their clients’ best interest

The Fact Sheet also reports that that the Final Rule and Exemptions contain significant changes based on the feedback received during the comment period:

  • Further clarifying what constitutes fiduciary advice
  • Making best interest contract (BIC) exemption available for more advice
  • Streamlining and simplifying requirements of BIC exemption
  • Grandfathering existing investments
  • Extending implementation time period

This post is the first in a series that we will publish about key aspects of the Final Rule and Exemptions. Please stay tuned for further developments and analyses.

A copy of the Fact Sheet is available at http://src.bna.com/dUb.