New Retirement Security Final Rule Will Protect Workers from Improper Advice and Investments, DOL Says

The Biden-Harris administration announced that the U.S. Department of Labor has finalized its Retirement Security Rule to protect the millions of workers who are saving for retirement diligently and rely on advice from trusted professionals on how to invest their savings. This final rule will achieve this by updating the definition of an investment advice fiduciary under the Employee Retirement Income Security Act and the Internal Revenue Code.

The final rule and related amended prohibited transaction exemptions require trusted investment advice providers to give prudent, loyal, honest advice free from overcharges. These fiduciaries must adhere to high standards of care and loyalty when they recommend investments and avoid recommendations that favor the investment advice providers’ interests — financial or otherwise — at the retirement savers’ expense. Under the final rule and amended exemptions, financial institutions overseeing investment advice providers must have policies and procedures to manage conflicts of interest and ensure providers follow these guidelines.

The updated definition of an investment advice fiduciary, which takes effect on Sept. 23, 2024, applies when trusted financial services providers give compensated investment advice to retirement plan participants, individual retirement account owners and plan officials responsible for administering plans and managing their assets. 

“America’s workers and their families rely on investment professionals for guidance as they save for retirement,” said Acting Secretary Julie Su. “This rule protects the retirement investors from improper investment recommendations and harmful conflicts of interest. Retirement investors can now trust that their investment advice provider is working in their best interest and helping to make unbiased decisions.”

The rule aligns with the Biden-Harris administration’s effort to protect retirement investors and put more money into the pockets of workers and their families. While acknowledging that investment professionals deserve to be paid fairly for helping retirement investors meet their savings goals and retire with dignity, the effort seeks to prevent advice providers from putting their interests before their clients. 

For more information on the rule, see the Department of Labor’s press release announcing the rule to protect retirement savers’ interests.

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