PLANSPONSOR - May/June 2024 - 6

RULES & REGULATIONS
From Washington and the Courts
Final Retirement Security
Rule Is Law
On April 23, the Department of Labor
issued its final Retirement Security rule,
which clarifies for plan sponsors and individuals
how fiduciary obligations under the
Employee Retirement Income Security Act
apply to investment professionals dealing
with retirement-related investments.
The Biden administration and the
Department of Labor's Employee Benefits
Security Administration announced that
the rule will update the definition of an
" investment advice fiduciary " found in
ERISA and the Internal Revenue Code.
The final rule will require " trusted investment
advice providers " and financial
institutions working with them to ensure
there are no conflicts of interest or overcharges
when clients use their services.
During a media briefing, department
officials said the rule and related prohibited
transaction exemptions will be active
on September 23 in terms of the obligation
for investment advisers to follow impartial
conduct standards and acknowledge their
6 PLANSPONSOR.COM May - June 2024
fiduciary status. Many of the other exemptions
and reporting needs will not kick in
until September 2025. The full rule is
available on the Federal Register.
The initial proposal, issued last
October, had to endure financial industry
and Congressional backlash, threats of litigation,
and over 20,000 public comments
and petitions to be able to make it into
the Federal Register as law of the land.
The final rule contains most of the key
elements of the proposal, including the
replacement of ERISA's five-point fiduciary
test with one that applies fiduciary
status to rollovers to individual retirement
accounts, annuity sales and qualified plan
investment menu design.
One difference in the final rule that
department officials noted, however, was
the dropping of the first part of a threepart
test for defining what it means to be
a fiduciary. The omitted part had focused
on whether an investment adviser had
discretion over assets; the second focused
on the context of the relationship and
communications with an investor; and
the third addressed whether an adviser
Art by Parapaboom
had proclaimed fiduciary status.
EBSA officials said they dropped
the first prong, as the second and third
prongs already addressed the " trust and
confidence " question regarding investment
advice. The department also made
" minor changes " to those prongs to make
the definition of fiduciary advice clear in
order to address industry questions.
DOL Finalizes QPAM Rule
The Department of Labor has finalized a
new rule governing the qualified professional
final
asset
manager exemption. The
rule adds new types of misconduct
that can result in a disqualification
and makes it easier for retirement plans
to leave a QPAM. The rule was initially
proposed in July 2022.
A
QPAM
is
an
investment
manager-often a bank or insurance
company-that facilitates transactions
between a qualified plan and parties
in interest. A plan normally may not
transact with a party in interest-which
can include service providers and the
sponsor itself-unless those parties are
http://www.PLANSPONSOR.COM
PLANSPONSOR - May/June 2024

Table of Contents for the Digital Edition of PLANSPONSOR - May/June 2024
