Summary of the Department of Labor’s (DOLs) 2020 Final Rule rescinding DOL’s 2016 Fiduciary Rule.

Updated 04/27/2021

This tool provides a background history on ERISA, a brief synopsis of the Department of Labor’s attempts to further regulate the retirement account industry through the 2016 Fiduciary Rule, a short description of the court’s actions in the 2018 Fifth Circuit case that vacated the 2016 Fiduciary Rule, and a breakdown of the resultant 2020 DOL final rule that implemented the effects of the 2018 Fifth Circuit court case. Generally, the effect of the 2020 rule are to revert the regulation of certain aspects of the retirement account industry to the pre-2016 rules. The following are the key takeaways of the changes:

  1. The reinstated definition of “fiduciary,” abandons the principles-based approach and resumes the use of the five-part test established under the 1975 rules, including that a) the advice is given as to the value of securities or property or as to the advisability of investing in securities or property, b) the advice is given on a regular basis, c) the advice is given based on a mutual agreement or understanding between the parties, d) the advice will serve as the primary basis for investment decisions, and e) the advice will be specialized for the individual needs of the investor.
  2. The new standard for asset allocation models (which is the same as it was pre-2016) is that to the extent that an asset allocation model identifies any specific investment alternative available, the model should be accompanied by a statement indicating that other investment alternatives having similar risk and return characteristics may be available under the plan and identify where information on those investment alternatives may be obtained.

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