Tag Archives: hire me

The New Fiduciary Rule (34): The “Hire Me” Exception

Key Takeaways

  • The DOL’s final regulation defining non-discretionary fiduciary advice will be effective on September 23 of this year.
  • If a conflicted fiduciary recommendation is made, the requirements (called “conditions”) of PTEs 2020-02 and 84-24 will need to be satisfied in order to retain any compensation resulting from the recommendation.
  • However, absent a fiduciary recommendation, the relief afforded by the exemptions will not be needed.
  • There are three ways to engage with retirement investors without making a recommendation. Those are: “hire me”, education and unsolicited. This article discusses the “hire me” approach.

The Department of Labor’s (DOL) final regulation defining fiduciary status for investment advice to retirement investors is effective on September 23, 2024. The related exemptions—PTE 2020-02 and 84-24—are partially effective on the same date. The exemptions provide relief from prohibited conflicts and compensation resulting from fiduciary recommendations to “retirement investors”–private sector retirement plans, participants in those plans (including rollover recommendations), and IRAs (including transfer and exchange recommendations).

However, the relief provided by the PTEs is not needed unless a conflicted fiduciary recommendation is made. In the preamble to the fiduciary regulation, the DOL described a recommendation as follows:

Continue reading The New Fiduciary Rule (34): The “Hire Me” Exception


The New Fiduciary Rule (24): The DOL Fiduciary Rule Requires a Recommendation. What is That?

In November 2023, the U.S. Department of Labor released its package of proposed changes to the regulation defining fiduciary advice and to the exemptions for conflicts and compensation for investment recommendations to retirement plans, participants (including rollovers), and IRAs (including transfers). On March 8, 2024, the DOL sent the final rule to the Office of Management and Budget in the White House.

Key Takeaways

    • The DOL’s proposed fiduciary regulation includes a new and expanded definition of when a representative of a broker-dealer, investment adviser, bank or insurance company will become a fiduciary under ERISA and the Internal Revenue Code.
    • The new definition starts with whether a “recommendation” has been made. If a recommendation results in fiduciary status, but does not include a conflict of interest, the only purpose of the definition is to determine whether ERISA’s fiduciary standards apply to advice to ERISA-governed retirement plans (including participants in those plans). It would have no effect under the Code (e.g., IRAs) in that case.
    • However, if a fiduciary recommendation is conflicted, it will be a prohibited transaction under ERISA and the Code, which would necessitate compliance with the conditions of a prohibited transaction exemption (PTE).
    • This article discusses the definition of “recommendation.”

The preamble to the proposed fiduciary regulation describes the significance of a recommendation as follows:

Whether a person has made a ‘‘recommendation’’ is a threshold element in establishing the existence of fiduciary investment advice.

Continue reading The New Fiduciary Rule (24): The DOL Fiduciary Rule Requires a Recommendation. What is That?