In April 2016, the Department of Labor (DOL) issued a final rule that replaces the existing regulatory interpretation of fiduciary investment advice under the Employee Retirement Income Security Act of 1974 (ERISA) (fiduciary rule). The fiduciary rule broadens the types of advice that constitute fiduciary investment advice under ERISA Section 3(21)(A)(ii) (29 U.S.C. §1002(3)(21)) and Section 4975(e)(3)(B) of the Internal Revenue Code (Code) (26 U.S.C. § 4975(e)(3)(B)), subject to specific exclusions for particular types of communications that are non-fiduciary in nature. In connection with the final rule, the DOL also issued two new prohibited transaction exemptions (PTEs) as well as revisions to several existing PTEs. The fiduciary rule applies to both ERISA-governed employee benefit plans and IRAs.

ERISA Section 3(21)(A)(ii) defines a fiduciary to include a person that renders investment advice for a fee or other compensation, direct or indirect, regarding any money or other property of a retirement plan or has any authority or responsibility to do so. The Code defines fiduciary identically for purposes of the prohibited transaction provisions of the Code, which also apply to IRAs.

There are significant potential consequences attached to an entity's status as a fiduciary. Both ERISA and the Code broadly prohibit fiduciaries from engaging in certain transactions that may create conflicts of interest. Fiduciaries engaging in a prohibited transaction may be subject to excise taxes under the Code and significant potential liability under both ERISA and the Code.

The PTEs accompanying the final rule impose a "best interest" standard on fiduciary investment advisers that effectively:

The IRA market, in which financial professionals previously were not subject to ERISA's fiduciary rules at all, is perhaps the most significantly impacted by the imposition of the new best interest standard. However, the fiduciary rule also creates a new burden for financial service providers to ERISA-governed plans, along with their affiliates, whose communications with plan sponsors and administrators may now be considered fiduciary in nature.

This Toolkit is a collection of resources to assist attorneys counseling employers and financial service providers on the definition of fiduciary investment advice under ERISA and the fiduciary rule.

In 2018, the DOL's final fiduciary investment advice rule was vacated by the Fifth Circuit Court of Appeals, rendering the final rule invalid. Accordingly, this Toolkit exists to provide background information only.