One of the challenges of being an attorney is keeping current on changes in the law. At the Sullivan Law Office, we take great pride in the legal research skills of our attorneys. On April 6, 2016, the U.S. Department of Labor (DOL) issued a highly anticipated ruling addressing when a person is considered to be a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (Code) as a result of providing investment advice to a plan. The definition of “Plan” includes an individual retirement account (IRA)) or its beneficiaries. The final rule provides a definition of fiduciary investment advice that expands the list of individuals who may be considered fiduciaries.

ERISA provides that “a person is a fiduciary with respect to a plan to the extent . . . he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so.” ERISA § 3(21)(A)(ii). For an individual to be held to ERISA’s fiduciary standards regarding investment advice for a fee, this person must:

  • make recommendations as to investing in, purchasing or selling securities or other property, or give advice as to their value;
  • on a regular basis;
  • pursuant to a mutual understanding that the advice;
  • will serve as a primary basis for investment decisions with respect to plan assets; and
  • will be individualized to the particular needs of the plan.

In 2010, the DOL stated that it believed that the existing regulatory scheme no longer adequately protected plans, participants and beneficiaries. Thus, in April of 2015, the DOL proposed a new set of rules it believed necessary to adequately protects plans, participants, beneficiaries, and, in particular, IRA owners (to which ERISA’s current fiduciary rules do not apply) from conflicts of interest, imprudence and disloyalty.

Lobbyists from both sides went full throttle and in the end, the final rule was published and takes effect on April 10, 2017. The rule describes those kinds of communications or categories of advice that constitute “investment advice,” and then describes the types of relationships and circumstances that give rise to fiduciary investment advice. Thus, if advice constitutes “fiduciary investment advice,” he or she who provides the advice is subjected to fiduciary standards and specific prohibited transaction rules.

If you have any questions or concerns about ERISA, or any kind of disability case, including Social Security Disability, long-term disability, short-term disability, state retirement and workers’ compensation, call the Sullivan Law Office today! Call 888-587-0228 or visit us online.When Is A Person Considered To Be A Fiduciary Under The Employee Retirement Income Security Act Of 1974?