On April 8, 2016, the Department of Labor (DOL) published the final version of its long-awaited fiduciary rule.  The rule defines who is a “fiduciary” of an employee benefit plan under the Employee Retirement Income Security Act of 1974 (ERISA) as a result of giving investment advice to a plan or its participants or beneficiaries.  The rule treats individuals who provide investment advice or recommendations for a fee or other compensation with respect to assets of a plan or IRA as fiduciaries “in a wider array of advice relationships.” The rule also applies to the definition of a “fiduciary” under the Internal Revenue Code of 1986.   The final rule contains several carve-outs to what constitutes “investment advice,” including general retirement education, order-taking from clients, and sales pitches to certain large plan fiduciaries.  The final rule also provides exemptions, including the Best Interest Contract exemption and Principal Transaction exemption.

The final rule contains a number of changes to the proposed rule released by the DOL in April 2015.  Labor Secretary Thomas Perez said the DOL “streamlined” the rule in response to the more than 3,000 public comments it received and the four days of public hearings it held.

The rule becomes effective on June 7, 2016.  Implementation of the rule will be phased in over a 20-month period.  Initial compliance with portions of the rule will take effect on April 10, 2017.  Several of the requirements for meeting the Best Interest Contract exemption or Principal Transaction exemption will not go into effect until January 1, 2018 in order to give firms more time to come into full compliance.

The final rule, along with  the DOL’s Fact Sheet, FAQs, and a chart highlighting the differences between the April 2015 proposal and the final rule, can be found here.