Clifford Chance

U.S. Department of Labor Releases FAQ Guidance on Fiduciary Rules

29 November 2016

On October 27, 2016, the U.S. Department of Labor issued guidance on the recently released fiduciary rules, which generally take effect on April 10, 2017. The guidance is set forth in the form of "frequently asked questions" and is based on questions received by the DOL following the release of the rules. The DOL is expected to release two additional rounds of guidance before the rules take effect.

As discussed in our prior client briefing, on April 6, 2016, the DOL issued final regulations re-defining the meaning of the term "investment advice fiduciary" under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986. As widely publicized, the Final Regulations expanded the class of advisers and the scope of investment advice that will be subject to the fiduciary standards set forth under ERISA. In connection with the release of the Final Regulations, the DOL also finalized certain exemptions from the prohibited transaction rules under ERISA, which include, most notably, the "Best Interest Contract Exemption" The BIC Exemption provides relief from ERISA prohibited transaction rules, which otherwise prevent an adviser from receiving variable compensation in exchange for providing investment advice. In order to comply with the BIC Exemption, a fiduciary must conclude that the investment advice is in the "best interest" of the plan or IRA and comply with certain impartial conduct standards and other rules.

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