On April 14, 2015, the U.S. Department of Labor (“DOL”) released a re-proposed regulation defining who is considered a “fiduciary” of an employee benefit plan under the Employee Retirement Income Security Act (“ERISA”) with respect to investment advice provided to a plan or its participants or beneficiaries. The proposal, which replaces a prior proposed regulation issued in 2010, also applies to the definition of a “fiduciary” of a plan (including an IRA) under the Internal Revenue Code of 1986 (the “Code”). If adopted, the proposal would treat persons who provide investment advice or recommendations to an employee benefit plan, plan fiduciary, plan participant or beneficiary, IRA, or IRA owner as fiduciaries under ERISA and the Code in a broader scope of advice relationships than the existing ERISA and Code regulations. For instance, included among the proposed categories of fiduciary investment advice is a “recommendation as to the advisability of acquiring, holding, disposing or exchanging securities or other property, including a recommendation to take a distribution of benefits or a recommendation as to the investment of securities or other property to be rolled over or otherwise distributed from the plan or IRA.” In this regard, the DOL has stated that the current ERISA fiduciary standard, the product of a 1975 regulation, pre-dates the “existence of participant-directed 401(k) plans, widespread investments in IRAs and the now commonplace rollover of plan assets from fiduciary-protected plans to IRAs.” Thus, as the DOL’s notice of proposed rulemaking states, “many investment professionals, consultants and advisers are not required to adhere to ERISA’s fiduciary standards or to the prohibited transaction rules” and “may operate with conflicts of interest that they need not disclose and have limited liability under federal pension law for any harms resulting from the advice they provide.” The proposal also includes a number of specific carve-outs from the definition of investment advice, as well as new and amended prohibited transaction exemptions. Comments on the proposal are due by July 6, 2015.

The proposal is available at: https://federalregister.gov/a/2015-08831