Definition
The DOL fiduciary rule is the Department of Labor's series of rulemakings defining when a professional providing investment advice for compensation to a retirement account is an ERISA fiduciary with respect to that advice.
Why it matters
The DOL fiduciary rule is the mechanism by which the ERISA fiduciary standard is extended — or not extended — to the population of professionals who advise on IRAs, rollovers out of DC plans, and other retirement accounts. Whether a given rollover recommendation or annuity purchase recommendation is subject to the ERISA fiduciary standard is materially determined by which version of the DOL fiduciary rule is in force and how it is being interpreted. The rule has been the subject of successive DOL rulemakings, court challenges, and revisions, and its scope is a live regulatory question rather than a settled matter.
How it works
The core interpretive question the DOL fiduciary rule addresses is the meaning of "investment advice fiduciary" under ERISA Section 3(21)(A)(ii), which defines a fiduciary in part as anyone who renders investment advice for a fee or other compensation with respect to plan assets. Under a 1975 DOL regulation, the definition was operationalized through a five-part test requiring the advice to be individualized, provided on a regular basis, pursuant to a mutual understanding that it would serve as a primary basis for the recipient's investment decisions, and rendered for a fee or other compensation. The 1975 test excluded most one-time rollover recommendations from ERISA fiduciary status. Successive DOL rule-makings — a 2016 rule vacated by the Fifth Circuit in 2018, a 2020 rulemaking package that reinterpreted the 1975 test to cover more rollover situations, and a 2024 rule-making that would have broadened the definition further — have attempted to expand the scope of investment advice fiduciary status, with each attempt facing litigation. The operative scope at any given time reflects the current DOL rulemaking, judicial rulings on it, and DOL interpretive guidance. Professionals subject to the rule must comply with the ERISA fiduciary duty of loyalty and care with respect to the covered advice, and their compensation arrangements must comply with the prohibited transaction rules unless a class exemption — most commonly Prohibited Transaction Exemption 2020-02 — is used.
In practice
For an individual receiving a recommendation about an IRA rollover from a DC plan, or about the purchase of an annuity with retirement funds, whether the recommendation is subject to the ERISA fiduciary standard depends on the operative version of the DOL fiduciary rule and its application to the specific facts. Ask the professional whether they are acting as an ERISA fiduciary with respect to the specific recommendation, what prohibited transaction exemption (if any) they are relying on for their compensation, and what disclosures the exemption requires them to provide. For rollovers, PTE 2020-02 typically requires a documented rollover analysis comparing the DC plan and the destination IRA, including fees, services, and available investment options. The operative rule and its status may change; the plan participant or the professional's compliance materials should identify the current framework at the time of the recommendation.
Related terms
- ERISA fiduciary standard
- Investment advice fiduciary
- Fiduciary standard
- Prohibited transaction
- Rollover
- Regulation Best Interest
- ERISA Section 404
- Best interest standard