DOL Fiduciary Rule

The undertaking by the US Department of Labor (DOL) to expand the “investment advice fiduciary” definition under the Employee Retirement Income Security Act of 1974 (ERISA), and to modify the complex of prohibited transaction exemptions for investment activities in light of that expanded definition, has become the most substantial, controversial and politicized ERISA rulemaking since the enactment of the statute.

Most recently, the DOL released a proposal in October 2023 to again redefine ERISA fiduciary “investment advice” and to remake the complex of ERISA exemptions allowing conflicted advice. The proposal was finalized and released on April 23, 2024.

Our analysis: DOL’s final Fiduciary Rule 4.0

This unprecedented rulemaking has included:

• Three prior proposals;
  • Proposal 1.0, the initial October 2010 proposal, which was abandoned in September 2011 in the face of broad opposition;
  • Proposal 2.0, the April 2015 reproposal, which produced the April 2016 Final Rule 2.0 that greatly expanded the ERISA fiduciary definition and adopted the infamous BIC Exemption. It took effect June 9, 2017, with a full compliance date of July 1, 2019;
  • Proposal 3.0, released in June 2020, which interpreted the traditional fiduciary definition to include rollover advice and proposed a new exemption for conflicted investment advice.  DOL adopted Rule 3.0 in December 2020 with a February 16, 2021, effective date;
• Two presidential speeches, introducing Proposals 2.0 and 4.0; and
• One vacated rule. Six litigations challenged the validity of Rule 2.0, which survived decisions by three District Courts and one Court of Appeals, only to be vacated by the Fifth Circuit in March 2018.

 

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Eversheds Sutherland has been actively involved in the DOL fiduciary rulemaking process since the original proposal was released. We bring together a multi-disciplinary team to provide comprehensive compliance advice to clients in the retirement plan, banking, insurance, mutual fund, broker-dealer and investment adviser sectors. We provide practical advice on the impact of the rulemaking on every aspect of our clients’ businesses, including retirement product and service development, distribution, platform management, regulatory compliance, and investigations and litigation challenges.