The Death of the DOL’s 2024 Retirement Security Rule: What It Means for Investment Advisers Providing Rollover Advice 

By: Ariana Monchick, Managing Director

Since the Department of Labor’s (DOL) 2024 Retirement Security Rule (known as the 2024 Fiduciary Rule) and related amendments to Prohibited Transaction Exemption (PTE) 2020-02 were formally vacated by a federal district court in Texas earlier this year, many investment advisers have been left wondering how this impacts their current fiduciary practices and what, if anything, needs to change.  

The 2024 Fiduciary Rule was intended to significantly broaden the circumstances under which financial professionals would be deemed fiduciaries under the Employee Retirement Income Security Act of 1974 (ERISA) when providing retirement investment advice, including one-time advice on IRA rollovers and annuity purchases, and would have replaced regulatory text dating back to 1975 that sets out a five-part test for determining fiduciary status under ERISA. However, following the court’s decision to vacate the rule, the DOL restored the five-part fiduciary test that has governed retirement investment advice for decades. That said, the court’s decision did not eliminate the retirement rollover advice requirements of PTE 2020-02, which remain in full force and effect. 

The Five-Part Fiduciary Test Returns  

With the court’s vacatur, fiduciary status under ERISA once again depends on satisfying the DOL’s five-part test. Under Section 3(21) of ERISA and Section 4975(e) of the Internal Revenue Code (IRC), a person is deemed a fiduciary with respect to an ERISA plan or an IRA if the person renders investment advice for a fee or other compensation, direct or indirect, or has any authority or responsibility to do so. Under the five-part test, a person is providing investment advice if the person: 

• Renders investment advice to the ERISA plan or IRA as to the value of securities or property, or makes recommendations as to investing in, purchasing or selling securities or other property, 

• On a regular basis, 

• Pursuant to a mutual agreement, arrangement or understanding with the ERISA plan, the ERISA plan fiduciary or the IRA owner that, 

• The advice will serve as a primary basis for investment decisions with respect to the ERISA plan’s or IRA’s assets, and 

• The advice will be individualized based on the particular needs of the ERISA plan or IRA. 

All five prongs of the test must be met to be considered an “investment advice fiduciary.” 

The 2024 Fiduciary Rule substantially expanded this definition by treating one-time recommendations, such as rollover recommendations, as fiduciary advice. However, the federal district court determined that the DOL exceeded its statutory authority in expanding the fiduciary definition in this manner, resulting in the death of the rule.  

What Happens to PTE 2020-02? 

PTE 2020-02 provides exemptive relief to financial institutions that provide fiduciary investment advice to ERISA plans, ERISA plan participants and IRAs and receive otherwise prohibited compensation for such advice, so long as certain conditions are met. As part of the 2024 Fiduciary Rule, certain related amendments were made to PTE 2020-02 that expanded the availability of the exemption, added new disclosure requirements, and included a correction procedure that would have allowed financial institutions to self-correct violations of the exemption without reporting to the DOL. These amendments to PTE 2020-02 were challenged in court with the 2024 Fiduciary Rule, resulting in the effective date being stayed by federal district courts. Litigation then ensued, with the DOL eventually dropping its appeal of the stays earlier this year and withdrawing the amendments to the exemption. 

PTE 2020-02 continues to permit Investment Advice Fiduciaries to receive compensation that would otherwise be prohibited under ERISA and the IRC, provided the financial institution: 

• Adheres to the Impartial Conduct Standards by providing advice in the retirement investor’s best interest, charging no more than reasonable compensation and avoiding materially misleading statements; 

• Acknowledges in writing their and their financial professionals’ fiduciary status under ERISA and the IRC (as applicable) when providing investment advice to the retirement investor, and describes in writing the services to be provided and the financial institution’s and its financial professionals’ material conflicts of interest; 

• Documents the reasons the rollover recommendation is in the best interest of the retirement investor and provide documentation of the best interest analysis to the retirement investor; 

• Maintains policies and procedures prudently designed to ensure compliance with Impartial Conduct Standards and that mitigate conflicts of interest; and 

• Conducts a retrospective review of compliance. 

Although PTE 2020-02 remains operative, its preamble, certain portions of which were judicially vacated, was found by the DOL to no longer be reliable and was vacated in its entirety. 

SEC Requirements for Rollover Recommendations 

Although the DOL’s 2024 Fiduciary Rule has been vacated, firms should not interpret the court’s decision as reducing their fiduciary obligations under the Investment Advisers Act when providing retirement advice. The Securities and Exchange Commission (SEC) emphasized in its 2026 exam priorities that investment recommendations made to investors saving for retirement must align with the client’s investment objective, risk tolerance, and financial/personal background and will be an area of focus for the SEC during examinations of investment advisers. Firms should take steps now to evaluate existing practices for retirement rollover advice, including: 

• Reviewing policies and procedures to ensure references to the vacated Retirement Security Rule are removed. 

• Confirming rollover recommendation documentation remains robust and supports the best interest analysis requirement. 

• Continuing periodic testing of rollover recommendations for compliance with PTE 2020-02 conditions. 

• Ensuring financial professionals understand existing fiduciary obligations and regulatory requirements when providing retirement advice. 

Looking Ahead 

While the DOL has tried (unsuccessfully) to expand what it means to provide investment advice to plan assets of an ERISA plan or IRA for the last 15 years, it is unknown whether this or future administrations will revisit the issue through new rulemaking. What we do know is that retirement advice and demonstrating fiduciary obligations are being met remain areas of interest to regulators. Investment advisers that provide retirement advice should continue to demonstrate a commitment to acting in clients’ best interests and to complying with PTE 2020-02 when applicable.