U.S. Department of Labor Issues Proposed Rule Regarding Fiduciary Definition

The U.S. Department of Labor (“DOL”) issued a proposed rule relating to the definition of fiduciary under ERISA and Section 4975 of the Code. The proposed rule, if adopted, would replace certain long-standing regulations relating to the definition of fiduciary with respect to the provision of investment advice and would expand the number of persons who would be fiduciaries in connection with providing investment advice or recommendations. According to the DOL, under the proposed changes, “retirement advisors will be required to put their clients’ best interests before their own profits.”

In connection with the proposed rule, the DOL proposed certain new class exemptions and amendments to several existing class exemptions from the prohibited transaction rules of ERISA and Section 4975 of the Code (including PTEs 75-1, 86-128, 77-4 and 84-24). These class exemptions and amendments would permit certain brokers, insurance agents and others to continue to receive certain types of compensation that would otherwise be prohibited.

The DOL had proposed regulations relating to the same subject matter in 2010 that were subsequently withdrawn.