U.S. Department of Labor Announces Exemption to Improve Investment Advice and Enhance Financial Choices for Workers and Retirees

WASHINGTON, DC – The U.S. Department of Labor today announced a new exemption for investment advice fiduciaries. The Department’s actions today benefit American workers and retirees by delivering more choices for their financial future with clear standards to be upheld by investment advice providers. The Department’s Employee Benefits Security Administration (EBSA) developed the exemption.

“Today’s action provides clear regulatory standards that ensure American workers and retirees have access to high-quality, affordable investment advice,” U.S. Secretary of Labor Eugene Scalia said. “In tandem with action taken last year by the Securities and Exchange Commission, this exemption gives Americans a greater opportunity to invest in the American economy with the assistance of professionals acting in their best interest.”

“This exemption preserves access to investment advice and promotes choice for retirement investors,” said Acting Assistant Secretary of Labor for the Employee Benefits Security Administration Jeanne Klinefelter Wilson. “Under the exemption, investment professionals must plainly tell retirement investors that they are acting as fiduciaries and they must act in the retirement investors’ best interest. In this way, the exemption protects retirement investors by requiring investment professionals to lay down clear markers about their relationship and their conduct with retirement investors.”

The new prohibited transaction class exemption is for investment advice fiduciaries and is based on an existing temporary policy adopted after the 5th Circuit Court of Appeals vacated the Department’s 2016 fiduciary rule package. The exemption allows investment advice fiduciaries to offer a wide array of investment advice services in compliance with Impartial Conduct Standards. Impartial Conduct Standards are a best interest standard, a reasonable compensation standard and a requirement to make no materially misleading statements. Since the 5th Circuit’s 2018 ruling, the Securities and Exchange Commission (SEC) has issued a package of advice standards. The standards in the Department’s exemption announced today align with standards of other regulators, including the SEC. Together, the actions of the SEC and the Department of Labor strengthen retirement security for Americans.  

The exemption notice also expresses the Department’s views on when rollover advice could be considered fiduciary advice under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code.

The exemption and a summary of the exemption’s key provisions are available on EBSA’s website. The exemption will be effective 60 days after publication in the Federal Register. The temporary enforcement policy stated in Field Assistance Bulletin 2018-02 will remain in place for one year after the final exemption is published in the Federal Register.

EBSA’s mission is to assure the security of the retirement, health and other workplace related benefits of America's workers and their families. EBSA accomplishes this mission by developing effective regulations; assisting and educating workers, plan sponsors, fiduciaries and service providers; and vigorously enforcing the law.

The mission of the Department of Labor is to foster, promote and develop the welfare of the wage earners, job seekers and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.