The Department of Labor will unveil a new proposal of its revised fiduciary rule today in a ceremony at the White House. Among the changes are amendments to the department’s five-part test that would include rollover recommendations under fiduciary protections.
“These updates are designed to close current loopholes and gaps in the law and bring rules in line with how most people save for retirement in our modern economy,” Acting DOL Director Julie Su said.
UPDATED: Read the new rule
Administration officials stressed that while Reg BI was a solid rule, it did not extend to scenarios in which investors may expect a best interest standard, like recommendations on selecting available options for a 401(k).
The new proposal will make sure that advice to plan sponsors about 401(k)s are considered fiduciary-covered recommendations and will also cover retirement advice provided on a one-time basis, such as a recommendation to rollover 401(k) assets into an IRA or annuity.
According to administration officials, there will be “minor amendments” to the DOL’s current rule on prohibited transaction exemptions, as well as some changes to Rule 84-24, which is often used by independent insurance brokers.
The proposed rule was delivered to the White House Office of Management and Budget in early September, with the OMB holding meetings with industry lobbyists and investor protection advocates throughout October.
There’ve been numerous previous iterations of the rule, including a 2000s-era rule the DOL reversed and an attempt by the Obama administration that the Fifth Circuit of Appeals struck down several years later. The Trump administration unveiled its own version of the rule in 2020, which went into effect the following year (and later encountered its own court challenges).
There are a number of “fairly significant differences” between the new proposal and the version vacated by the Fifth Circuit, according to administration officials. While the 2016 version included what was described as a relatively broad definition of the rule that included anyone providing investment advice for a fee, the new proposal is crafted to apply only to advisors with client relationships “of trust and confidence,” which administration officials said was based on the Fifth Circuit’s terminology.
The DOL will begin a comment period for members of the public to weigh in on the proposed rule after its release.
