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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 11 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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<p><img style="max-width: 100%;height: auto" width="564" height="267" src="https://www.erisalitigation.com/wp-content/uploads/sites/1017/2024/07/Building-Upward-scaled-1-825x347.jpg"></p>
			<h2 class="wp-block-heading">Introduction</h2>
<p>Few areas of retirement plan regulation have experienced as much turbulence &ndash; or generated as much practical uncertainty for plan sponsors, recordkeepers, and third-party administrators &ndash; as the Employee Retirement Income Security Act&rsquo;s (&ldquo;ERISA&rdquo;) definition of an &ldquo;investment advice fiduciary.&rdquo; After more than a decade of competing regulatory proposals, litigation victories and defeats, and policy reversals, as of March 20, 2026, the Department of Labor (&ldquo;DOL&rdquo;) reverted to the same regulatory standard that has governed retirement investment advice since 1975.</p>
<h3 class="wp-block-heading">The 1975 Foundation: The Five-Part Test</h3>
<p>ERISA fiduciaries are subject to strict legal standards. One way an individual becomes an ERISA fiduciary is if they provide investment advice for a fee or other compensation.&nbsp; Since 1975, the DOL has defined an &ldquo;investment advice fiduciary&rdquo; under ERISA through a five-part test. A person is treated as rendering investment advice only if all five of the following conditions are satisfied:</p>
<p>(1) the person renders advice as to the value of securities or other property, or makes recommendations as to the advisability of investing in, purchasing, or selling such property;</p>
<p>(2) the advice is provided on a regular basis;</p>
<p>(3) the advice is provided pursuant to a mutual agreement, arrangement, or understanding with the plan, its fiduciary, or the IRA owner;</p>
<p>(4) the advice serves as a primary basis for investment decisions with respect to plan assets; and</p>
<p>(5) the advice is individualized based on the particular needs of the plan or IRA.</p>
<p>As defined contribution plans and IRAs became the dominant vehicles for retirement savings, the burden of making investment decisions shifted to participants. Critics argued that the five-part test had become antiquated, and insufficient to safeguard retirement plan participants from unscrupulous financial professionals.</p>
<p>Successive administrations have attempted, with limited success, to revise the investment advice fiduciary definition to reflect the retirement market.&nbsp;</p>
<ul class="wp-block-list">
<li>In April 2016, the Obama administration issued a final fiduciary rule which broadly expanded the definition of investment advice, introduced new prohibited transaction exemptions, and amended several class exemptions. Generally, the fiduciary rule sought to broaden the interactions considered to constitute investment advice, while the new and amended exemptions made available to financial professionals provide broad relief subject to satisfaction of various enhanced requirements designed to protect participants. In 2018, the rule and related exemptions were vacated by the U.S. Court of Appeals for the Fifth Circuit for exceeding the DOL&rsquo;s statutory authority. Notably, a little over a year later, the Securities and Exchange Commission promulgated SEC Regulation Best Interest (Reg BI), which, among other things, requires broker-dealers to act in the best interest of retail customers at the time a recommendation is made.&nbsp;</li>
<li>In December 2020, the first Trump DOL issued Prohibited Transaction Exemption 2020-02 (&ldquo;PTE 2020-02&rdquo;) which, similar to the Obama administration&rsquo;s earlier attempt, provides broad relief to financial professionals who satisfy various requirements designed to protect participants. In the preamble to PTE 2020-02 as well as an FAQ issued later, the DOL stated that, under the five-part test, an investment advisor would satisfy the &ldquo;regular basis&rdquo; prong if it expects to make regular investment recommendations to an individual following a rollover recommendation. However, in 2023, the Middle District of Florida set aside the DOL&rsquo;s interpretation of the regular basis prong as arbitrary and capricious.</li>
<li>In April 2024, the Biden administration finalized the Retirement Security Rule, the most recent attempt to replace the five-part test. Among other changes, the Rule explicitly extended fiduciary coverage to one-time rollover advice and annuity recommendations and amended PTE 2020-02 and PTE 84-24 to impose heightened impartial conduct standards as a condition of relief.</li>
</ul>
<h3 class="wp-block-heading">The Retirement Security Rule&rsquo;s Demise</h3>
<p>Shortly after its issuance, the Biden-era Rule was challenged in two parallel federal lawsuits in Texas, whose district courts issued stays in July 2024 &ndash; well before its scheduled September 23, 2024 effective date &ndash; citing the same Fifth Circuit precedent that resulted in the vacatur of the Obama-era rule. The incoming Trump administration moved to dismiss its own appeal in November 2025, and on March 12, 2026, the Eastern District of Texas vacated the rule in its entirety.</p>
<h2 class="wp-block-heading">Thompson Hine Takeaways</h2>
<p>Based on the vacatur of the Retirement Security Rule and continued application of the five-part test, plan sponsors and retirement plan service providers should consider their approaches in several areas.</p>
<h3 class="wp-block-heading">Rollover Advice and Participant Communications</h3>
<p>Under the five-part test, a one-time recommendation to roll plan assets into an IRA is generally not fiduciary investment advice. This should reduce the compliance risks to recordkeepers that often field questions regarding rollovers from plan participants. In turn, the burden on plan sponsors to monitor such interactions and mitigate co-fiduciary risk has also been lessened. However, both groups should remain mindful that SEC Regulation Best Interest and the DOL&rsquo;s prohibited transaction rules governing use of participant data continue to apply. Further, rollover advice is likely to remain a central issue ripe for future regulatory action.</p>
<h3 class="wp-block-heading">Fiduciary Monitoring and Compliance</h3>
<p>The vacatur also provides welcome clarity. While the Biden-era rule was stayed before it was effective and therefore plan fiduciaries and potentially impacted parties largely had not been complying with it, the recent vacatur cements that it will not become the regulatory standard. The vacatur also swept away the Biden-era PTE amendments and the preamble of PTE 2020-02. Despite the clarity, many would-be fiduciaries are expected to maintain a best-interest standard voluntarily given the continued application of SEC Regulation Best Interest.</p>
<h3 class="wp-block-heading">Vendor Contracting and Service Provider Oversight</h3>
<p>ERISA continues to govern how plan sponsors select and monitor their service providers, regardless of whether those providers are fiduciaries. Service providers whose activities shade into advisory territory, particularly TPAs who recommend plan design features, investment menus, or distribution strategies, should continue to evaluate their fiduciary status carefully under the restored five-part test. Service providers who acknowledged fiduciary status in their agreements to facilitate PTE compliance may now seek to walk back those acknowledgments. Plan sponsors should be aware of and view skeptically blanket disclaimers of fiduciary status, as such disclaimers do not control when determining ERISA fiduciary status, and assess whether and how service providers are acting in a fiduciary capacity. Parties who updated plan documents or service agreements in anticipation of the Biden-era rule&rsquo;s September 2024 effective date should evaluate whether those updates should be retained, revised, or replaced.</p>

The Fiduciary Rule Pendulum: What You Need to Know

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