On April 23, 2024, the U.S. Department of Labor released the Retirement Security Rule defining who is an investment advice fiduciary for purposes of the Employee Retirement Income Security Act (ERISA). The Department also released final amendments to class prohibited transaction exemptions (PTEs) available to investment advice fiduciaries, including PTE 2020-02, “Improving Investment Advice for Workers & Retirees.” The rule and amendments to the PTEs generally take effect on September 23, 2024, although there is a one-year transition period after the effective date for certain conditions in the PTEs.
According to the DOL, the Retirement Security Rule and amended PTEs will protect retirement investors by requiring trusted advice providers to follow high standards of care and loyalty when they make investment recommendations. Under the final rulemaking, trusted advisers will have to:
Meet a professional standard of care when making recommendations (give prudent advice);
Never put their financial interests ahead of the retirement investor’s when making recommendations (give loyal advice);
Avoid misleading statements about conflicts of interest, fees, and investments;
Charge no more than what is reasonable for their services; and
Give the retirement investor basic information about the adviser’s conflicts of interest.
The DOL states that the rule and exemptions are carefully designed to honor retirement investors’ legitimate expectation of advice that is in their best interest.
