The New Fiduciary Rule and Amended PTE 2020-02: Effective Date Considerations

The DOL’s new fiduciary advice rule, effective September 23, 2024, will cause many one-time recommendations to be fiduciary advice. As a result, many more recommendations to retirement investors—private sector retirement plans, participants in those plans, and IRA owners—by broker-dealers and their representatives (advisors) will undoubtedly be fiduciary advice under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (the Code).

If the fiduciary advice results in compensation that the advisor would not have received absent the advice (for example, commissions or 12b-1 fees on IRA investment transactions or advisory fees from the IRA, in the case of a rollover), it is considered conflicted compensation prohibited under ERISA and the Code. As a result, many advisors will need the protection provided by Prohibited Transaction Exemption (PTE) 2020-02 in order to receive the conflicted compensation resulting from the fiduciary advice.