On October 25, 2011, the Department of Labor (DOL) issued final regulations implementing a prohibited transaction exemption (PTE) for "fiduciary advisors," providing investment advice to participants and beneficiaries pursuant to an "eligible investment advice arrangement." The final regulations were issued as a result of the PPA, which established a PTE under ERISA permitting fiduciaries to provide investment advice to participants and beneficiaries in individual account plans (e.g., 401(k) plans), subject to certain conditions.
A fiduciary advisor is generally defined as a plan fiduciary by virtue of providing investment advice and is a registered investment advisor, bank or similar institution, insurance company, registered broker-dealer, an affiliate of one of these groups or an employee, agent, registered representative or affiliate of one of these entities. An eligible investment advice arrangement is an arrangement that meets the level-fee requirements of the new regulations, uses an acceptable computer-driven advice model, or uses both. Eligible investment advice arrangements must also be authorized by a plan fiduciary, be subject to annual audits and disclosed to plan participants. Along with the final regulations, the DOL has issued a voluntary model Fiduciary Advisor Disclosure that plans may provide to participants and beneficiaries for the disclosure of fees, compensation and services.