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Labor Department proposes exemption from fiduciary rule

The Department of Labor has issued a Notice of Proposed Class Exemption that would allow investment advice fiduciaries under both ERISA and the Internal Revenue Code to receive compensation, including as a result of advice to roll over assets from a Plan to an IRA, and to engage in principal transactions, that would otherwise violate the prohibited transaction provisions of ERISA and the Code. The exemption would apply to registered investment advisers, broker-dealers, banks, insurance companies, and their employees, agents, and representatives that are fiduciaries, but would include protective conditions designed to safeguard the interests of Plans, participants and beneficiaries, and IRA owners.

Comments on the proposed class exemption will be accepted for 30 days following Federal Register publication. The Department proposes to make a final rule effective 60 days after it is issued and published.

The Department has also issued technical amendments to its regulations at 29 CFR parts 2509 and 2510 to implement the Fifth Circuit Court of Appeals 2018 vacatur [vacating, nullification, or setting aside] of Labor's 2016 final rule ("Conflict of Interest Rule — Retirement Investment Advice" or the "Fiduciary Rule") defining who is a "fiduciary" under ERISA and the Internal Revenue Code. In essence, Labor's new technical amendments remove language from the Code of Federal Regulations that the Fiduciary Rule added, and reinstates the Department's 1975 regulation and an interpretive bulletin. It also removes the two class exemptions Labor granted in connection with the Fiduciary Rule. These technical amendments will be effective on publication in the Federal Register.

PUBLICATION UPDATE: The proposed rule was published 7/7/2020 at 85 FR 40834 with a 30-day comment period ending 8/6/2020. The technical amendments were published as a final rule on 7/7/2020 at 85 FR 40589 effective upon publication.

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