Overview
Almost a year after the Department of Labor (DOL or Department) re-proposed its regulation defining “investment advice fiduciary” under the Employee Retirement Income Security Act, as amended (ERISA) and the Internal Revenue Code of 1986, as amended (Code), the DOL has finalized the regulation and the exemptions accompanying it. The breadth of the definition itself will make virtually anyone speaking with a plan participant or an individual retirement account (IRA) owner into a fiduciary unless an exception is met. Rollover recommendations are now defined as fiduciary advice, as is advice on the type of account (brokerage versus advisory) and lists of securities that might meet a plan or IRA client’s needs.
The final rule has been changed to stagger the implementation dates. Under the final rule, the changes in the definition of fiduciary are effective June 7, 2016, but are not applicable until April 10, 2017. Between June 7, 2016 and April 10, 2017, the prior regulation (as it appeared in the Code of Federal Regulations in 2015) continues to apply. The new and amended exemptions accompanying the final rule are likewise effective June 7, 2016, but inapplicable until April 10, 2017. However, the new “Best Interest Contract” (BIC) exemption and the exemption for “Principal Transactions in Certain Assets” also provide for a “transition period” between April 10, 2017 and January 1, 2018, during which relief will be available under fewer conditions.
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