DOL Adopts Final Rule Defining "Fiduciary"

The Department of Labor ("DOL") adopted its final regulation addressing the definition of who is a fiduciary of an employee benefit plan under ERISA, or a plan under Section 4975 of the Internal Revenue Code, by virtue of giving investment advice to a plan, its participants or its beneficiaries.

The DOL noted several changes from the 2015 proposed regulation, which include:

• a clarification that marketing one's services without an investment recommendation is not fiduciary investment advice;

• a revised version of the "counterparty" carve-out from the proposal, which excludes from fiduciary investment advice communications in arm's-length transactions with certain plan fiduciaries who are licensed financial professionals (broker-dealers, registered investment advisers, banks, insurance companies, etc.) or plan fiduciaries who have at least $50 million under management;

• a revised version of the proposal's swap transaction carve-out; and

• the removal of appraisals from the final rule, reserving them for a separate rulemaking by the DOL.

The DOL specified that, "in light of the importance of the final rule’s consumer protections and the significance of the continuing monetary harm to retirement investors without the rule’s changes," the applicability date of the final rule is April 10, 2017. The DOL asserted that the applicability date provides adequate time for plans and their affected service providers to adjust to the "basic change" from non-fiduciary to fiduciary status.