The Department of Labor (DOL) issued its final rule related to investment advice. Plans subject to ERISA must comply with ERISA’s fiduciary standards. Providing investment advice for a fee is a fiduciary act. These regulations clarify when an investment professional is acting in a fiduciary capacity.

The fiduciary standard applies to a financial advisor if the individual makes an investment recommendation to an investor, the investment recommendation is made for a fee or other compensation, the financial advisor holds himself or herself out as a trusted advisor by:

• Stating it is a fiduciary; or
• Making recommendations in a way that would indicate to an investor that he or she is a trusted advisor making individualized recommendations based on the investor’s best interests.

Notably these regulations include in the definition of fiduciary one time advice such as advice provided to an individual relating to a distribution from a 401k plan as long as the criteria described above are met.

A plan fiduciary is required to comply with the care, prudence, and loyalty required of an ERISA fiduciary. This means the individual must avoid any misleading statements about conflicts of interest, fees or investments and any fee or other compensation must be reasonable.

The regulations clarify that the fiduciary rules would not apply to investment education or investment information, for example offered by an HR Department to plan participants. Further, the rules would not apply to a sales situation when investment advice is not given, the salesperson recommends a product, does not suggest fiduciary status and the circumstances do not indicate that a reasonable person would assume it is receiving advice specific to his or her circumstances or that it is advancing his or her best interests.

The regulations are expected to take effect on September 23, 2024, with a one-year delay for certain prohibited transaction provisions.

The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. This information is provided as general guidance and may be affected by changes in law or regulation. This information is not intended to replace or substitute for accounting or other professional advice. You must consult your own attorney or tax advisor for assistance in specific situations. 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.