A News Release (dated October 21, 2010) announces that the Department of Labor (the “DOL”) has issued a proposed rule, in the form of a regulation, to update the definition of “fiduciary” ,used for purposes of ERISA, to more broadly include in the term a person who provides investment advice to plans for a fee or other compensation.
According to the News Release, the DOL’s proposed rule would amend a 1975 regulation that defines when a person providing investment advice becomes a fiduciary under ERISA. The amendment would update that definition to take into account changes in the expectations of plan officials and participants who receive advice, as well as the practices of investment advice providers. The 1975 rule’s approach to fiduciary status may inappropriately limit the department’s ability to protect plans, participants and beneficiaries from conflicts of interest that may arise from today’s diverse and complex fee practices in the retirement plan services market. The proposed rule is designed to remedy this limitation, and protect plan officials and participants who expect unbiased advice, by giving a broader and clearer understanding of when individuals providing such advice become fiduciaries and are therefore subject to ERISA’s fiduciary standards.
The proposed rule, as published in the Federal Register on Oct. 22, 2010, is here.