The Fifth Circuit on March 15 vacated U.S. Department of Labor (DOL) regulations that redefined the circumstances in which a person who provides investment advice in connection with a retirement plan or individual retirement arrangement (IRA) acts as a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. The opinion came two days after the 10th Circuit upheld the same regulations.

The regulations (known as the investment advice fiduciary rules), were issued together with a series of proposed amendments to prohibited transaction exemptions. The regulations significantly altered the landscape for how employee benefit plans, their fiduciaries and participants, and IRA holders receive investment advice. The DOL initially proposed a version of these investment advice fiduciary rules in October 2010, but later withdrew the initial proposal due to concerns raised by the business community and lawmakers from both parties.

A new set of proposed regulations was issued in April 2015 and final regulations were issued in April 2016. Plan sponsors and investment advisors were required to comply with these regulations beginning on January 1, 2018, with a phased approach under which fewer conditions apply between January 2018 and July 1, 2019. The DOL had indicated that this 18-month extension would allow the time for the DOL to complete a review—as directed by President Donald J. Trump—of alternatives to the regulations.

It is unclear what will happen next to the DOL's investment advice fiduciary regulations because there is now a split among the Circuit Courts regarding the fate of the regulations. The DOL could request a stay of the ruling while it seeks an en banc opinion from the Fifth Circuit or ask the U.S. Supreme Court to address the case.

Attorneys in Ballard Spahr's Employee Benefits and Executive Compensation Group help clients design and implement compensation and benefits packages that comply with today's complex regulatory requirements, attract and retain a quality workforce, and maintain fiscal and fiduciary responsibility.


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