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April 5, 2018

Fiduciary Rules Vacated (article)

After numerous delays in implementation and court challenges, the Department of Labor’s Employee Benefits Security Administration (EBSA) fiduciary investment advice rules were to take effect on July 1, 2019.  Then, on March 15, 2018, the Fifth Circuit Court of Appeals vacated the rules specific to the expansion of ERISA's definition of fiduciary and the related prohibited transaction exemptions. 

In accordance with the Court Order, the vacation of the fiduciary rules takes effect in early May 2018.  If the rules are vacated, then the fiduciary standards would return to ERISA’s five-part prior rule standards for defining fiduciary and investment advice.  Under these prior rules, an individual could be deemed a fiduciary if, for a fee, he/she 1) provides advice or makes recommendations on investments 2) on a regular basis 3) in accordance with a mutual agreement or understanding that the advice 4) would serve as the primary basis for investment decisions 5) that would be individualized to the particular needs of the plan.

Any number of actions by the Department of Labor (DOL) could be taken at this point  It is possible that the DOL would appeal to the full Fifth Circuit; it is also possible, as a result of a split in the circuit courts, a review by the Supreme Court could be sought. 

In the meantime, the fiduciary investment advice regulations remain in effect.  The only thing that is certain is that issues surrounding this matter will continue to evolve.  At this point, plans should stay the course until there is clarity about next steps.  In all instances, plan assets must be used for the exclusive benefit of plan participants.


The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein. 

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