DOL Releases Guidance on Investment Advice Exemption

The Department of Labor (DOL)’s Employee Benefits Security Administration (EBSA) has released guidance on fiduciary investment advice for retirement investors, employee benefit plans and investment advice providers. The DOL first announced the fiduciary prohibited transaction exemption (PTE), called “Improving Investment Advice for Workers & Retirees,” on February 12, and it went into effect four days later, on February 16.

At the time the PTE was announced, officials said it “allowed for important investor protections, including a stringent ‘best interest’ standard of care for fiduciary recommendations of rollovers from ERISA [Employee Retirement Income Security Act]-protected retirement accounts.”

The new guidance consists of two documents, the first being “Choosing the Right Person to Give You Investment Advice: Information for Investors in Retirement Plans.” It sets forth questions an investor can ask potential advice providers, information to help them understand the purpose of each question and frequently asked questions about the exemption.

The second document provides guidance for investment advice providers that want to rely on the exemption.

“The retirement investor guidance provides helpful information regarding the importance of selecting an investment advice provider who is a fiduciary, and the protections that are provided to retirement investors under the ‘Improving Investment Advice for Workers & Retirees’ exemption,” said Acting Assistant Secretary of Labor for Employee Benefits Security Ali Khawar. “The compliance-focused frequently asked questions provide assistance to financial institutions and investment professionals as they ramp up compliance with the exemption.”