The Labor Department’s Employee Benefits Security Administration said last week that it has removed from the Code of Federal Regulations the Biden-era 2024 final fiduciary rule and restored the Employee Retirement Income Security Act’s five-part test for determining whether a person is an investment advice fiduciary.
EBSA is responding to final judgments entered in the Northern and Eastern Districts of Texas vacating the rule, “Retirement Security Rule: Definition of an Investment Advice Fiduciary.”
“The vacatur notice in the Federal Register reflects the judicial resolution of legal challenges to the 2024 final rule and to amendments of associated prohibited transaction exemptions and restores ERISA’s five-part test,” Labor said.
“The challenged regulation wrongly sought to impose ERISA fiduciary status on securities brokers and insurance agents when there was not a relationship of trust and confidence,” said Daniel Aronowitz, assistant secretary of Labor for employee benefits security, in a statement. “The Securities and Exchange Commission and state regulators regulate the activities of securities brokers and insurance agents and will continue to do so.”
See also: Why fiduciary governance matters more than ever
Labor said that it has “no current plans to engage in notice and comment rulemaking in this regard and remains focused on its core mission, redoubling its efforts to make employer-based U.S. retirement plans the strongest and most innovative in the world.”
The department “will consider whether any additional guidance, including transitional or non-enforcement relief, is appropriate,” according to the statement.
Lisa Gomez, who led EBSA during Biden’s administration, said on LinkedIn that “the five-part test is a decades-old framework designed for a very different marketplace than the one retirement savers experience today—before the rise of rollovers in a retirement saver’s decision making process, before the increase in complicated advice models and complex investment products, and before millions of Americans were asked to navigate retirement largely on their own.
“The importance of this moment should not be understated,” she added. “The conversation is not over. I look forward to hearing your thoughts on where we go from here.”
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