[Federal Register Volume 91, Number 54 (Friday, March 20, 2026)]
[Rules and Regulations]
[Pages 13503-13510]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-05492]
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DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2510
RIN 1210-AC36
Retirement Security Rule: Definition of an Investment Advice
Fiduciary: Notice of Court Vacatur
AGENCY: Employee Benefits Security Administration, Department of Labor.
ACTION: Final rule; technical amendment.
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SUMMARY: This document implements the judicial vacatur of the
Department's 2024 final rule defining who is a ``fiduciary'' under the
Employee Retirement Income Security Act of 1974. This document also
reflects the judicial vacatur of the Department's 2024 amendments to
Prohibited Transaction Exemption 2020-02 (PTE 2020-02) and the judicial
vacatur of portions of the preamble to PTE 2020-02; and republishes in
full the operative text of PTE 2020-02 (as originally published on
December 18, 2020).
DATES: Effective April 20, 2026.
FOR FURTHER INFORMATION CONTACT: Fred Wong, Office of Regulations and
Interpretations, Employee Benefits Security Administration (EBSA) (202)
693-8500; Susan Wilker, Office of Exemption Determinations, EBSA (202)
693-8557. These are not toll-free numbers.
SUPPLEMENTARY INFORMATION: This SUPPLEMENTARY INFORMATION contains two
parts. Part I includes background information and explains the reasons
for the actions being taken. Part II republishes the operative text of
PTE 2020-02 as originally published on December 18, 2020. The
amendatory text contains the housekeeping amendments to title 29 of the
Code of Federal Regulations (CFR).
Part I. Background
1. 2024 Fiduciary Rule and Related Litigation
On April 25, 2024, the Department of Labor published a final
regulation, titled ``Retirement Security Rule: Definition of an
Investment Advice Fiduciary'' (2024 Fiduciary Rule), defining who is a
``fiduciary'' of an employee benefit plan under section 3(21)(A)(ii) of
the Employee Retirement Income Security Act of 1974 (ERISA) as a result
of giving investment advice to a plan or its participants or
beneficiaries for a fee or other compensation.\1\ The 2024 Fiduciary
Rule also applied to the definition of a ``fiduciary'' of a plan
(including an individual retirement account (IRA)) under section
4975(e)(3)(B) of the Internal Revenue Code of 1986 (Code). The 2024
Fiduciary Rule replaced regulatory text, dating back to 1975, that set
out a five-part test for determining fiduciary status under section
3(21)(A)(ii) of ERISA (Five-part Test Regulation).\2\ Also on April 25,
2024, the Department adopted amendments to Prohibited Transaction
Exemption (PTE) 2020-02, titled Improving Investment Advice for Workers
& Retirees, described below.
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\1\ 89 FR 32122 (Apr. 25, 2024).
\2\ 40 FR 50842 (Oct. 31, 1975).
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In May 2024, litigation was brought by the Federation of Americans
for Consumer Choice (FACC) in the United States District Court for the
Eastern District of Texas, and by the American Council of Life Insurers
(ACLI) in the United States District Court for the Northern District of
Texas, challenging the 2024 Fiduciary Rule. The ACLI also challenged
the amendments to PTE 2020-02 adopted on April 25, 2024. On July 25 and
26, 2024, the district court for the Eastern District of Texas and the
district court for the Northern District of Texas, respectively,
granted motions staying the effective date of the 2024 Fiduciary Rule.
Fed'n of Ams. for Consumer Choice, Inc. v. U.S. Dep't of Labor, 742 F.
Supp. 3d 677, 702 (E.D. Tex. 2024); Am. Council of Life Insurers v.
U.S. Dep't of Labor, No. 4:24-cv-482-O, 2024 WL 3572297, at *9 (N.D.
Tex. Jul. 26, 2024). The district court for the Northern District of
Texas also stayed the effective date of the amendments to PTE 2020-
02.\3\
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\3\ The United States District Court for the Northern District
of Texas also stayed the effective date of the amendments to PTEs
75-1, 77-4, 80-83, 83-1, 84-24, and 86-128. 24 WL 3572297, at *1,
*9. The United States District Court for the Eastern District of
Texas also stayed the effective dates of the amendments to PTE 84-
24.
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[[Page 13504]]
2. Litigation Related to Five-Part Test Regulation
On December 18, 2020, the Department adopted PTE 2020-02, a
prohibited transaction exemption under ERISA and the Code, permitting
investment advice fiduciaries with respect to employee benefit plans
and IRAs to receive compensation that would otherwise be prohibited, in
the absence of an exemption, subject to certain conditions. PTE 2020-02
expressly covers prohibited transactions resulting from both rollover
advice and advice on how to invest assets within a plan or IRA. The
preamble to PTE 2020-02, in addition to describing its terms, also
provided the Department's interpretation of the Five-part Test
Regulation. Among other matters, the preamble provided guidance on when
advice to roll over plan assets to an IRA would be considered fiduciary
investment advice under the Five-part Test Regulation. In April 2021,
the Department issued further guidance in a set of ``Frequently Asked
Questions'' (2021 FAQs), including FAQ 7, which related to rollover
advice under the Five-part Test Regulation and built on guidance
provided in the preamble to PTE 2020-02.
In February 2022, the FACC brought litigation in the United States
District Court for the Northern District of Texas challenging the
Department's guidance in the preamble of PTE 2020-02 with respect to
rollover advice and to the regular basis requirement of the Five-part
Test Regulation. Also in February 2022, the American Securities
Association (ASA) brought litigation in the United States District
Court for the Middle District of Florida challenging the ``policies
referenced in'' FAQ 7. On February 13, 2023, the district court in the
ASA case vacated the ``policy referenced in FAQ 7.'' Am. Sec. Ass'n v.
U.S. Dep't of Labor, 22-cv-00330-VMC, 2023 WL 1967573, at *22 (M.D.
Fla. Feb. 13, 2023). On May 16, 2023, the United States Department of
Justice voluntarily withdrew its appeal of the ASA ruling. With respect
to the FACC challenge, on June 30, 2023, a United States Magistrate
Judge issued Findings, Conclusions, and Recommendations of the United
States Magistrate Judge on Plaintiffs' Motion for Summary Judgment and
Defendants' Cross-Motion to Dismiss for Lack of Jurisdiction or, in the
Alternative, for Summary Judgment. Fed'n of Ams. for Consumer Choice,
Inc. v. U.S. Dep't of Labor, No. 3:22-cv-243-K-BT, 2023 WL 5682411
(N.D. Tex. June 30, 2023). On July 9, 2025, the district court in the
FACC case issued an order accepting the Magistrate Judge's Findings,
Conclusions, and Recommendations, and vacating portions of the preamble
to PTE 2020-02 in which the Department interpreted the Five-part Test
Regulation. Order Accepting Findings and Recommendation of the United
States Magistrate Judge. Fed'n of Ams. for Consumer Choice, Inc. v.
U.S. Dep't of Labor, No. 3:22-cv-243-K-BT, 2025 WL 1898668 (N.D. Tex.
July 9, 2025).
3. Effect of Litigation
The 2024 orders by the district courts in the Eastern and Northern
Districts of Texas stayed the effective date of the 2024 Fiduciary
Rule, which left in place the prior regulatory text, i.e., the Five-
part Test Regulation. The 2024 order of the district court in the
Northern District of Texas stayed the effective date of the 2024
amendments to PTE 2020-02, leaving in place PTE 2020-02 as adopted on
December 18, 2020. Further, these orders remain undisturbed because of
the dismissal of the consolidated appeal by the U.S. Court of Appeals
for the Fifth Circuit, dated November 28, 2025,\4\ and the final
judgment in the district courts dated March 12, 2026, in the Eastern
District of Texas and March 17, 2026, in the Northern District of
Texas. Because the 2024 Fiduciary Rule never became effective, and the
Five-part Test Regulation was never replaced, this document takes the
administrative steps necessary to conform the regulatory text in the
CFR.
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\4\ Fed'n of Ams. for Consumer Choice, Inc. et al., v. U.S.
Dep't of Labor, Nos. 24-40637 and 24-10890 (5th Cir. Nov. 28, 2025)
(order dismissing appeal pursuant to appellant's motion).
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Even though PTE 2020-02 has remained operative, its preamble is no
longer reliable due to the courts' vacaturs in the 2022 litigation. In
the ASA ruling, prior to vacating the ``policy referenced in FAQ 7,''
the district court observed that the ``policy referenced in FAQ 7''
also is referenced in the preamble to PTE 2020-02. American Securities
Ass'n, 2023 WL 1967573, at *10. Moreover, although the court in FACC
vacated only portions of the preamble to PTE 2020-02, the matters
addressed in those vacated portions interrelate with matters and
guidance in other portions of the preamble to such an extent that the
Department is no longer confident in the soundness of the remaining
portions of the preamble. The scope and style of the courts' vacaturs
leave in their wake too much ambiguity regarding what portions of the
preamble guidance remain valid and reliable. For example, while some
portions of the preamble may lack an express connection to fiduciary
investment advice, fiduciary investment advice is nonetheless the
foundation on which the entire preamble discussion is based, making it
difficult to determine whether and/or the extent the retention of
portions of the preamble would frustrate the intention of the courts.
To protect stakeholders from relying on preamble language that either
has been directly invalidated by the courts' vacaturs, or preamble
language that may be rendered logically flawed or misinterpreted as a
direct or indirect consequence of the courts' vacaturs, the Department,
in this document, clarifies its view that the entire preamble of PTE
2020-02 is effectively vacated.
What is not ambiguous, however, is that neither district court
questioned the procedural aspects of the Department's grant of PTE
2020-02, including the Department's required findings under section
408(a) of ERISA and section 4975(c)(2) of the Code that PTE 2020-02 is
administratively feasible, in the interests of plans and their
participants and beneficiaries and IRA owners, and protective of the
rights of participants and beneficiaries of plans and IRA owners. These
findings continue to be expressed through the exemption's conditions,
which are set forth below. Accordingly, today's action (like the
courts' vacaturs), which leaves in full effect each term and condition
of PTE 2020-02 as originally granted, has no impact on any finding
underpinning PTE 2020-02, including the Department's findings under
section 408(a) of ERISA and section 4975(c)(2) of the Code. As a matter
of convenience for interested persons, Part II of this document is
republishing in full the text of PTE 2020-02, without the amendments
adopted on April 25, 2024. This ministerial action reflects the
judicial actions discussed above and affects no legal rights or
obligations and imposes no costs.\5\
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\5\ EBSA's website will be updated to reflect the applicability
of the pre-amendment version of the affected exemptions (including
75-1, 77-4, 80-83, 83-1, 84-24, and 86-128).
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4. Procedural and Other Matters
The Administrative Procedure Act provides that when an agency for
good cause finds that notice and public procedure are impracticable,
unnecessary, or contrary to the public interest, the agency may issue a
rule without providing notice and an opportunity for public comment. 5
U.S.C. 553(b)(B). The Department has determined that there is good
cause for dispensing with public comments in
[[Page 13505]]
this case, inasmuch as this final rule merely conforms the text in the
CFR to reflect the mandate of the courts' decisions by removing the
2024 Fiduciary Rule from the CFR and replacing it with the Five-part
Test Regulation. Because the Department is merely giving effect to the
courts' orders, and is not exercising discretion with respect to this
action, any notice and comment process would be unnecessary (e.g.,
because no comment could impact the Department's responsibility to
follow legal orders), impracticable (e.g., because the Department's
actions are required by legal orders), and contrary to the public
interest (e.g., because a notice and comment process would serve only
to slow down the finalization of, and the coordination of public policy
clarity associated with, a result already mandated by the courts). In
2020, the Department made similar findings in connection with
implementing a judicial vacatur of a final rule relating to fiduciary
investment advice adopted in 2016.\6\
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\6\ See 85 FR 40589 (July 7, 2020).
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Likewise, while notice and an opportunity to comment are rights
granted to citizens subject to the rulemaking process, the Department
is under no obligation to provide such rights in the absence of a final
agency action. In this case, the preamble of today's final rule
provides notice that the Department no longer considers the preamble to
PTE 2020-02 to be reliable guidance considering the effects of two
courts' vacaturs of portions of that preamble. But this interpretive
position regarding that preamble is not final agency action triggering
notice and comment. In the Department's view, just as the original
making of the preamble to PTE 2020-02 was interpretive action and not
final agency action triggering notice and comment rights, unmaking that
preamble interpretively in the preamble to today's final rule likewise
does not trigger notice and comment rights. 5 U.S.C. 553(b)(A).
Further, to the extent the act of vacating the preamble to PTE 2020-02
is the type of action that could have triggered the APA's notice and
comment rights, it was the two district courts--through their
vacaturs--that mandated action, and not the Department which is merely
giving effect to the courts' orders in a responsible manner.
This final rule has been determined to be not a significant
regulatory action for purposes of Executive Orders 12866 and 13563.
Additionally, no analysis is required under the Regulatory Flexibility
Act or Sections 202 and 205 of the Unfunded Mandates Reform Act of
1999, because, for the reasons discussed above, the Department is not
required to engage in notice and comment under the Administrative
Procedure Act. This final rule does not have significant Federalism
implications under Executive Order 13132. The Office of Information and
Regulatory Affairs has determined that this final rule is not a
significant regulatory action under Executive Order 12866. The final
rule is not subject to the requirements of the Paperwork Reduction Act
of 1995 (PRA 95) (44 U.S.C. 3501 et seq.), because it does not contain
a collection of information as defined in 44 U.S.C. 3502(3).
The Congressional Review Act, 5 U.S.C. 801 et seq., generally
provides that before certain actions may take effect, the agency
promulgating the action must submit a report, which includes a copy of
the action, to each House of the Congress and to the Comptroller
General of the United States. This final action is administrative and
only implements the district courts' rulings. Accordingly, the
Department has determined that good cause exists, and that this
technical amendment is not subject to the timing requirements of the
Congressional Review Act.
Part II. Republication of PTE 2020-02
This section republishes in full the operative text of PTE 2020-02
as originally published in the Federal Register on December 18,
2020.\7\ PTE 2020-02 is not codified in the CFR.
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\7\ 85 FR 82798, 82862 (Dec. 18, 2020).
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Section I--Transactions
(a) In general. ERISA Title I (Title I) and the Internal Revenue
Code (the Code) prohibit fiduciaries, as defined, that provide
investment advice to Plans and individual retirement accounts (IRAs)
from receiving compensation that varies based on their investment
advice and compensation that is paid from third parties. Title I and
the Code also prohibit fiduciaries from engaging in purchases and sales
with Plans or IRAs on behalf of their own accounts (principal
transactions). This exemption permits Financial Institutions and
Investment Professionals who provide fiduciary investment advice to
Retirement Investors to receive otherwise prohibited compensation and
engage in riskless principal transactions and certain other principal
transactions (Covered Principal Transactions) as described below. The
exemption provides relief from the prohibitions of ERISA section
406(a)(1)(A), (D), and 406(b), and the sanctions imposed by Code
section 4975(a) and (b), by reason of Code section 4975(c)(1)(A), (D),
(E), and (F), if the Financial Institutions and Investment
Professionals provide fiduciary investment advice in accordance with
the conditions set forth in Section II and are eligible pursuant to
Section III, subject to the definitional terms and recordkeeping
requirements in Sections IV and V.
(b) Covered transactions. This exemption permits Financial
Institutions and Investment Professionals, and their Affiliates and
Related Entities, to engage in the following transactions, including as
part of a rollover from a Plan to an IRA as defined in Code section
4975(e)(1)(B) or (C), as a result of the provision of investment advice
within the meaning of ERISA section 3(21)(A)(ii) and Code section
4975(e)(3)(B):
(1) The receipt of reasonable compensation; and
(2) The purchase or sale of an asset in a riskless principal
transaction or a Covered Principal Transaction, and the receipt of a
mark-up, mark-down, or other payment.
(c) Exclusions. This exemption does not apply if:
(1) The Plan is covered by Title I of ERISA and the Investment
Professional, Financial Institution or any Affiliate is (A) the
employer of employees covered by the Plan, or (B) a named fiduciary or
plan administrator with respect to the Plan that was selected to
provide advice to the Plan by a fiduciary who is not independent of the
Financial Institution, Investment Professional, and their Affiliates;
(2) The transaction is a result of investment advice generated
solely by an interactive website in which computer software-based
models or applications provide investment advice based on personal
information each investor supplies through the website, without any
personal interaction or advice with an Investment Professional (i.e.,
robo-advice); or
(3) The transaction involves the Investment Professional acting in
a fiduciary capacity other than as an investment advice fiduciary
within the meaning of the regulations at 29 CFR 2510.3-21(c)(1)(i) and
(ii)(B) or 26 CFR 54.4975-9(c)(1)(i) and (ii)(B) setting forth the test
for fiduciary investment advice.
Section II--Investment Advice Arrangement
Section II requires Investment Professionals and Financial
Institutions to comply with Impartial Conduct Standards, including a
best interest
[[Page 13506]]
standard, when providing fiduciary investment advice to Retirement
Investors. In addition, the exemption requires Financial Institutions
to acknowledge fiduciary status under Title I and/or the Code, and
describe in writing the services they will provide and their material
Conflicts of Interest. Finally, Financial Institutions must adopt
policies and procedures prudently designed to ensure compliance with
the Impartial Conduct Standards when providing fiduciary investment
advice to Retirement Investors and conduct a retrospective review of
compliance.
(a) Impartial Conduct Standards. The Financial Institution and
Investment Professional comply with the following ``Impartial Conduct
Standards'':
(1) Investment advice is, at the time it is provided, in the Best
Interest of the Retirement Investor. As defined in Section V(b), such
advice reflects the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent person acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, based on the
investment objectives, risk tolerance, financial circumstances, and
needs of the Retirement Investor, and does not place the financial or
other interests of the Investment Professional, Financial Institution
or any Affiliate, Related Entity, or other party ahead of the interests
of the Retirement Investor, or subordinate the Retirement Investor's
interests to their own;
(2)(A) The compensation received, directly or indirectly, by the
Financial Institution, Investment Professional, their Affiliates and
Related Entities for their services does not exceed reasonable
compensation within the meaning of ERISA section 408(b)(2) and Code
section 4975(d)(2); and (B) as required by the federal securities laws,
the Financial Institution and Investment Professional seek to obtain
the best execution of the investment transaction reasonably available
under the circumstances; and
(3) The Financial Institution's and its Investment Professionals'
statements to the Retirement Investor about the recommended transaction
and other relevant matters are not, at the time statements are made,
materially misleading.
(b) Disclosure. Prior to engaging in a transaction pursuant to this
exemption, the Financial Institution provides the disclosures set forth
in (1) and (2) to the Retirement Investor:
(1) A written acknowledgment that the Financial Institution and its
Investment Professionals are fiduciaries under Title I and the Code, as
applicable, with respect to any fiduciary investment advice provided by
the Financial Institution or Investment Professional to the Retirement
Investor;
(2) A written description of the services to be provided and the
Financial Institution's and Investment Professional's material
Conflicts of Interest that is accurate and not misleading in all
material respects; and
(3) Prior to engaging in a rollover recommended pursuant to the
exemption, the Financial Institution provides the documentation of
specific reasons for the rollover recommendation, required by Section
II(c)(3), to the Retirement Investor.
(c) Policies and Procedures.
(1) The Financial Institution establishes, maintains, and enforces
written policies and procedures prudently designed to ensure that the
Financial Institution and its Investment Professionals comply with the
Impartial Conduct Standards in connection with covered fiduciary advice
and transactions.
(2) Financial Institutions' policies and procedures mitigate
Conflicts of Interest to the extent that a reasonable person reviewing
the policies and procedures and incentive practices as a whole would
conclude that they do not create an incentive for a Financial
Institution or Investment Professional to place their interests ahead
of the interest of the Retirement Investor.
(3) The Financial Institution documents the specific reasons that
any recommendation to roll over assets from a Plan to another Plan or
an IRA as defined in Code section 4975(e)(1)(B) or (C), from an IRA as
defined in Code section 4975(e)(1)(B) or (C) to a Plan, from an IRA to
another IRA, or from one type of account to another (e.g., from a
commission-based account to a fee-based account) is in the Best
Interest of the Retirement Investor.
(d) Retrospective Review.
(1) The Financial Institution conducts a retrospective review, at
least annually, that is reasonably designed to assist the Financial
Institution in detecting and preventing violations of, and achieving
compliance with, the Impartial Conduct Standards and the policies and
procedures governing compliance with the exemption.
(2) The methodology and results of the retrospective review are
reduced to a written report that is provided to a Senior Executive
Officer.
(3) A Senior Executive Officer of the Financial Institution
certifies, annually, that:
(A) The officer has reviewed the report of the retrospective
review;
(B) The Financial Institution has in place policies and procedures
prudently designed to achieve compliance with the conditions of this
exemption; and
(C) The Financial Institution has in place a prudent process to
modify such policies and procedures as business, regulatory, and
legislative changes and events dictate, and to test the effectiveness
of such policies and procedures on a periodic basis, the timing and
extent of which is reasonably designed to ensure continuing compliance
with the conditions of this exemption.
(4) The review, report and certification are completed no later
than six months following the end of the period covered by the review.
(5) The Financial Institution retains the report, certification,
and supporting data for a period of six years and makes the report,
certification, and supporting data available to the Department, within
10 business days of request, to the extent permitted by law including
12 U.S.C. 484.
(e) Self-Correction. A non-exempt prohibited transaction will not
occur due to a violation of the exemption's conditions with respect to
a transaction, provided:
(1) Either the violation did not result in investment losses to the
Retirement Investor or the Financial Institution made the Retirement
Investor whole for any resulting losses;
(2) The Financial Institution corrects the violation and notifies
the Department of Labor of the violation and the correction via email
to [email protected] within 30 days of correction;
(3) The correction occurs no later than 90 days after the Financial
Institution learned of the violation or reasonably should have learned
of the violation; and
(4) The Financial Institution notifies the person(s) responsible
for conducting the retrospective review during the applicable review
cycle and the violation and correction is specifically set forth in the
written report of the retrospective review required under subsection
II(d)(2).
Section III--Eligibility
(a) General. Subject to the timing and scope provisions set forth
in subsection (b), an Investment Professional or Financial Institution
will be ineligible to rely on the exemption for 10 years following:
(1) A conviction of any crime described in ERISA section 411
arising out of such person's provision of investment advice to
Retirement
[[Page 13507]]
Investors, unless, in the case of a Financial Institution, the
Department grants a petition pursuant to subsection (c)(1) below that
the Financial Institution's continued reliance on the exemption would
not be contrary to the purposes of the exemption ; or
(2) Receipt of a written ineligibility notice issued by the
Department for (A) engaging in a systematic pattern or practice of
violating the conditions of this exemption in connection with otherwise
non-exempt prohibited transactions; (B) intentionally violating the
conditions of this exemption in connection with otherwise non-exempt
prohibited transactions; or (C) providing materially misleading
information to the Department in connection with the Financial
Institution's or Investment Professional's conduct under the exemption;
in each case, as determined by the Department pursuant to the process
described in subsection (c).
(b) Timing and Scope of Ineligibility.
(1) An Investment Professional shall become ineligible immediately
upon (A) the date of the trial court's conviction of the Investment
Professional of a crime described in subsection (a)(1), regardless of
whether that judgment remains under appeal; or (B) the date of the
written ineligibility notice described in subsection (a)(2), issued to
the Investment Professional.
(2) A Financial Institution shall become ineligible following (A)
the 10th business day after the conviction of the Financial Institution
or another Financial Institution in the same Controlled Group of a
crime described in subsection (a)(1) regardless of whether that
judgment remains under appeal, or, if the Financial Institution timely
submits a petition described in subsection (c)(1) during that period,
21 days after the date of the Department's written denial of the
petition; or (B) 21 days after the date of the written ineligibility
notice, described in subsection (a)(2), issued to the Financial
Institution or another Financial Institution in the same Controlled
Group.
(3) Controlled Group. A Financial Institution is in the same
Controlled Group with another Financial Institution if it would be
considered in the same ``controlled group of corporations'' or ``under
common control'' with the Financial Institution, as those terms are
defined in Code section 414(b) and (c), in each case including the
accompanying regulations.
(4) Winding Down Period. Any Financial Institution that is
ineligible will have a one-year winding down period during which relief
is available under the exemption subject to the conditions of the
exemption other than eligibility. After the one-year period expires,
the Financial Institution may not rely on the relief provided in this
exemption for any additional transactions.
(c) Opportunity to be heard.
(1) Petitions under subsection (a)(1).
(A) A Financial Institution that has been convicted of a crime
described under subsection (a)(1) or another Financial Institution in
the same Controlled Group may submit a petition to the Department
informing the Department of the conviction and seeking a determination
that the Financial Institution's continued reliance on the exemption
would not be contrary to the purposes of the exemption. Petitions must
be submitted, within 10 business days after the date of the conviction,
to the Department by email at [email protected].
(B) Following receipt of the petition, the Department will provide
the Financial Institution with the opportunity to be heard, in person
or in writing or both. The opportunity to be heard in person will be
limited to one in-person conference unless the Department determines in
its sole discretion to allow additional conferences.
(C) The Department's determination as to whether to grant the
petition will be based solely on its discretion. In determining whether
to grant the petition, the Department will consider the gravity of the
offense; the relationship between the conduct underlying the conviction
and the Financial Institution's system and practices in its retirement
investment business as a whole; the degree to which the underlying
conduct concerned individual misconduct, or, alternately, corporate
managers or policy; how recent was the underlying lawsuit; remedial
measures taken by the Financial Institution upon learning of the
underlying conduct; and such other factors as the Department determines
in its discretion are reasonable in light of the nature and purposes of
the exemption. The Department will provide a written determination to
the Financial Institution that articulates the basis for the
determination.
(2) Written ineligibility notice under subsection (a)(2). Prior to
issuing a written ineligibility notice, the Department will issue a
written warning to the Investment Professional or Financial
Institution, as applicable, identifying specific conduct implicating
subsection (a)(2), and providing a six-month opportunity to cure. At
the end of the six-month period, if the Department determines that the
conduct persists, it will provide the Investment Professional or
Financial Institution with the opportunity to be heard, in person or in
writing or both, before the Department issues the written ineligibility
notice. The opportunity to be heard in person will be limited to one
in-person conference unless the Department determines in its sole
discretion to allow additional conferences. The written ineligibility
notice will articulate the basis for the determination that the
Investment Professional or Financial Institution engaged in conduct
described in subsection (a)(2).
(d) A Financial Institution or Investment Professional that is
ineligible to rely on this exemption may rely on a statutory or
separate administrative prohibited transaction exemption if one is
available or seek an individual prohibited transaction exemption from
the Department. To the extent an applicant seeks retroactive relief in
connection with an exemption application, the Department will consider
the application in accordance with its retroactive exemption policy as
set forth in 29 CFR 2570.35(d). The Department may require additional
prospective compliance conditions as a condition of retroactive relief.
Section IV--Recordkeeping
The Financial Institution maintains for a period of six years
records demonstrating compliance with this exemption and makes such
records available, to the extent permitted by law including 12 U.S.C.
484, to any authorized employee of the Department or the Department of
the Treasury.
Section V--Definitions
(a) ``Affiliate'' means:
(1) Any person directly or indirectly through one or more
intermediaries, controlling, controlled by, or under common control
with the Investment Professional or Financial Institution. (For this
purpose, ``control'' would mean the power to exercise a controlling
influence over the management or policies of a person other than an
individual);
(2) Any officer, director, partner, employee, or relative (as
defined in ERISA section 3(15)), of the Investment Professional or
Financial Institution; and
(3) Any corporation or partnership of which the Investment
Professional or Financial Institution is an officer, director, or
partner.
(b) Advice is in a Retirement Investor's ``Best Interest'' if such
advice reflects the care, skill, prudence, and
[[Page 13508]]
diligence under the circumstances then prevailing that a prudent person
acting in a like capacity and familiar with such matters would use in
the conduct of an enterprise of a like character and with like aims,
based on the investment objectives, risk tolerance, financial
circumstances, and needs of the Retirement Investor, and does not place
the financial or other interests of the Investment Professional,
Financial Institution or any Affiliate, Related Entity, or other party
ahead of the interests of the Retirement Investor, or subordinate the
Retirement Investor's interests to their own.
(c) A ``Conflict of Interest'' is an interest that might incline a
Financial Institution or Investment Professional--consciously or
unconsciously--to make a recommendation that is not in the Best
Interest of the Retirement Investor.
(d) A ``Covered Principal Transaction'' is a principal transaction
that:
(1) For sales to a Plan or an IRA:
(A) Involves a U.S. dollar denominated debt security issued by a
U.S. corporation and offered pursuant to a registration statement under
the Securities Act of 1933, a U.S. Treasury Security, a debt security
issued or guaranteed by a U.S. federal government agency other than the
U.S. Department of Treasury, a debt security issued or guaranteed by a
government-sponsored enterprise, a municipal security, a certificate of
deposit, an interest in a Unit Investment Trust, or any investment
permitted to be sold by an investment advice fiduciary to a Retirement
Investor under an individual exemption granted by the Department after
the effective date of this exemption that includes the same conditions
as this exemption; and
(B) If the recommended investment is a debt security, the security
is recommended pursuant to written policies and procedures adopted by
the Financial Institution that are reasonably designed to ensure that
the security, at the time of the recommendation, has no greater than
moderate credit risk and sufficient liquidity that it could be sold at
or near carrying value within a reasonably short period of time; and
(2) For purchases from a Plan or an IRA, involves any securities or
investment property.
(e) ``Financial Institution'' means an entity that is not
disqualified or barred from making investment recommendations by any
insurance, banking, or securities law or regulatory authority
(including any self-regulatory organization), that employs the
Investment Professional or otherwise retains such individual as an
independent contractor, agent or registered representative, and that
is:
(1) Registered as an investment adviser under the Investment
Advisers Act of 1940 (15 U.S.C. 80b-1 et seq.) or under the laws of the
state in which the adviser maintains its principal office and place of
business;
(2) A bank or similar financial institution supervised by the
United States or a state, or a savings association (as defined in
section 3(b)(1) of the Federal Deposit Insurance Act (12 U.S.C.
1813(b)(1)));
(3) An insurance company qualified to do business under the laws of
a state, that: (A) Has obtained a Certificate of Authority from the
insurance commissioner of its domiciliary state which has neither been
revoked nor suspended; (B) has undergone and shall continue to undergo
an examination by an independent certified public accountant for its
last completed taxable year or has undergone a financial examination
(within the meaning of the law of its domiciliary state) by the state's
insurance commissioner within the preceding five years, and (C) is
domiciled in a state whose law requires that an actuarial review of
reserves be conducted annually and reported to the appropriate
regulatory authority;
(4) A broker or dealer registered under the Securities Exchange Act
of 1934 (15 U.S.C. 78a et seq.); or
(5) An entity that is described in the definition of Financial
Institution in an individual exemption granted by the Department after
the date of this exemption that provides relief for the receipt of
compensation in connection with investment advice provided by an
investment advice fiduciary under the same conditions as this class
exemption.
(f) For purposes of subsection I(c)(1), a fiduciary is
``independent'' of the Financial Institution and Investment
Professional if: (i) The fiduciary is not the Financial Institution,
Investment Professional, or an Affiliate; (ii) the fiduciary does not
have a relationship to or an interest in the Financial Institution,
Investment Professional, or any Affiliate that might affect the
exercise of the fiduciary's best judgment in connection with
transactions covered by the exemption; and (iii) the fiduciary does not
receive and is not projected to receive within the current federal
income tax year, compensation or other consideration for his or her own
account from the Financial Institution, Investment Professional, or an
Affiliate, in excess of 2% of the fiduciary's annual revenues based
upon its prior income tax year.
(g) ``Individual Retirement Account'' or ``IRA'' means any plan
that is an account or annuity described in Code section 4975(e)(1)(B)
through (F).
(h) ``Investment Professional'' means an individual who:
(1) Is a fiduciary of a Plan or an IRA by reason of the provision
of investment advice described in ERISA section 3(21)(A)(ii) or Code
section 4975(e)(3)(B), or both, and the applicable regulations, with
respect to the assets of the Plan or IRA involved in the recommended
transaction;
(2) Is an employee, independent contractor, agent, or
representative of a Financial Institution; and
(3) Satisfies the federal and state regulatory and licensing
requirements of insurance, banking, and securities laws (including
self-regulatory organizations) with respect to the covered transaction,
as applicable, and is not disqualified or barred from making investment
recommendations by any insurance, banking, or securities law or
regulatory authority (including any self-regulatory organization).
(i) ``Plan'' means any employee benefit plan described in ERISA
section 3(3) and any plan described in Code section 4975(e)(1)(A).
(j) A ``Related Entity'' is any party that is not an Affiliate, but
in which the Investment Professional or Financial Institution has an
interest that may affect the exercise of its best judgment as a
fiduciary.
(k) ``Retirement Investor'' means:
(1) A participant or beneficiary of a Plan with authority to direct
the investment of assets in his or her account or to take a
distribution;
(2) The beneficial owner of an IRA acting on behalf of the IRA; or
(3) A fiduciary of a Plan or an IRA.
(l) A ``Senior Executive Officer'' is any of the following: The
chief compliance officer, the chief executive officer, president, chief
financial officer, or one of the three most senior officers of the
Financial Institution.
End of PTE 2020-02
Statutory Authority
This regulation is issued pursuant to the authority in section 505
of ERISA (Pub. L. 93-406, 88 Stat. 894; 29 U.S.C. 1135) and section 102
of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 237, and under
Secretary of Labor's Order No. 1-2011, 77 FR 1088 (Jan. 9, 2012).
List of Subjects in 29 CFR Part 2510
Employee benefit plans, Pensions.
For the reasons stated in the preamble, the Department is amending
part 2510 of subchapter B of chapter XXV of title 29 of the Code of
Federal Regulations as follows:
[[Page 13509]]
SUBCHAPTER B--DEFINITIONS AND COVERAGE UNDER THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974
PART 2510--DEFINITIONS OF TERMS USED IN SUBCHAPTERS C, D, E, F, AND
G OF THIS CHAPTER
0
1. The authority citation for part 2510 continues to read as follows:
Authority: 29 U.S.C. 1002(1)-(8), 1002(13)-(16), 1002(20),
1002(21), 1002(34), 1002(37), 1002(38), 1002(40)-(44), 1031, and
1135; Div. O, Title I, Sec. 101, Public Law 116-94, 133 Stat. 2534
(Dec. 20, 2019); Div. T, Title I, Sec. 105, Public Law 117-328, 136
Stat. 4459 (Dec. 29, 2022); Secretary of Labor's Order 1-2011, 77 FR
1088 (Jan. 9, 2012); Secs. 2510.3-21, 2510.3-101 and 2510.3-102 also
issued under Sec. 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C.
App. 752 (2018) (E.O. 12108, 44 FR 1065 (Jan. 3, 1979)), and 29
U.S.C. 1135 note. Section 2510.3-38 also issued under Sec. 1(b)
Public Law 105-72, 111 Stat. 1457 (Nov. 10, 1997).
0
2. Revise Sec. 2510.3-21 to read as follows:
Sec. 2510.3-21 Definition of ``Fiduciary.''
(a)-(b) [Reserved]
(c) Investment advice. (1) A person shall be deemed to be rendering
``investment advice'' to an employee benefit plan, within the meaning
of section 3(21)(A)(ii) of the Employee Retirement Income Security Act
of 1974 (the Act) and this paragraph, only if:
(i) Such person renders advice to the plan as to the value of
securities or other property, or makes recommendation as to the
advisability of investing in, purchasing, or selling securities or
other property; and
(ii) Such person either directly or indirectly (e.g., through or
together with any affiliate)--
(A) Has discretionary authority or control, whether or not pursuant
to agreement, arrangement or understanding, with respect to purchasing
or selling securities or other property for the plan; or
(B) Renders any advice described in paragraph (c)(1)(i) of this
section on a regular basis to the plan pursuant to a mutual agreement,
arrangement or understanding, written or otherwise, between such person
and the plan or a fiduciary with respect to the plan, that such
services will serve as a primary basis for investment decisions with
respect to plan assets, and that such person will render individualized
investment advice to the plan based on the particular needs of the plan
regarding such matters as, among other things, investment policies or
strategy, overall portfolio composition, or diversification of plan
investments.
(2) A person who is a fiduciary with respect to a plan by reason of
rendering investment advice (as defined in paragraph (c)(1) of this
section) for a fee or other compensation, direct or indirect, with
respect to any moneys or other property of such plan, or having any
authority or responsibility to do so, shall not be deemed to be a
fiduciary regarding any assets of the plan with respect to which such
person does not have any discretionary authority, discretionary control
or discretionary responsibility, does not exercise any authority or
control, does not render investment advice (as defined in paragraph
(c)(1) of this section) for a fee or other compensation, and does not
have any authority or responsibility to render such investment advice,
provided that nothing in this paragraph shall be deemed to:
(i) Exempt such person from the provisions of section 405(a) of the
Act concerning liability for fiduciary breaches by other fiduciaries
with respect to any assets of the plan; or
(ii) Exclude such person from the definition of the term ``party in
interest'' (as set forth in section 3(14)(B) of the Act) with respect
to any assets of the plan.
(d) Execution of securities transactions. (1) A person who is a
broker or dealer registered under the Securities Exchange Act of 1934,
a reporting dealer who makes primary markets in securities of the
United States Government or of an agency of the United States
Government and reports daily to the Federal Reserve Bank of New York
its positions with respect to such securities and borrowings thereon,
or a bank supervised by the United States or a State, shall not be
deemed to be a fiduciary, within the meaning of section 3(21)(A) of the
Act, with respect to an employee benefit plan solely because such
person executes transactions for the purchase or sale of securities on
behalf of such plan in the ordinary course of its business as a broker,
dealer, or bank, pursuant to instructions of a fiduciary with respect
to such plan, if:
(i) Neither the fiduciary nor any affiliate of such fiduciary is
such broker, dealer, or bank; and
(ii) The instructions specify:
(A) The security to be purchased or sold;
(B) A price range within which such security is to be purchased or
sold, or, if such security is issued by an open-end investment company
registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1,
et seq.), a price which is determined in accordance with Rule 22c-1
under the Investment Company Act of 1940 (17 CFR 270.22c-1);
(C) A time span during which such security may be purchased or sold
(not to exceed five business days); and
(D) The minimum or maximum quantity of such security which may be
purchased or sold within such price range, or, in the case of a
security issued by an open-end investment company registered under the
Investment Company Act of 1940, the minimum or maximum quantity of such
security which may be purchased or sold, or the value of such security
in dollar amount which may be purchased or sold, at the price referred
to in paragraph (d)(1)(ii)(B) of this section.
(2) A person who is a broker-dealer, reporting dealer, or bank
which is a fiduciary with respect to an employee benefit plan solely by
reason of the possession or exercise of discretionary authority or
discretionary control in the management of the plan or the management
or disposition of plan assets in connection with the execution of a
transaction or transactions for the purchase or sale of securities on
behalf of such plan which fails to comply with the provisions of
paragraph (d)(1) of this section, shall not be deemed to be a fiduciary
regarding any assets of the plan with respect to which such broker-
dealer, reporting dealer or bank does not have any discretionary
authority, discretionary control or discretionary responsibility, does
not exercise any authority or control, does not render investment
advice (as defined in paragraph (c)(1) of this section) for a fee or
other compensation, and does not have any authority or responsibility
to render such investment advice, provided that nothing in this
paragraph shall be deemed to:
(i) Exempt such broker-dealer, reporting dealer, or bank from the
provisions of section 405(a) of the Act concerning liability for
fiduciary breaches by other fiduciaries with respect to any assets of
the plan; or
(ii) Exclude such broker-dealer, reporting dealer, or bank from the
definition, of the term ``party in interest'' (as set forth in section
3(14)(B) of the Act) with respect to any assets of the plan.
(e) Affiliate and control. (1) For purposes of paragraphs (c) and
(d) of this section, an ``affiliate'' of a person shall include:
(i) Any person directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control
with such person;
(ii) Any officer, director, partner, employee or relative (as
defined in
[[Page 13510]]
section 3(15) of the Act) of such person; and
(iii) Any corporation or partnership of which such person is an
officer, director or partner.
(2) For purposes of this paragraph, the term ``control'' means the
power to exercise a controlling influence over the management or
policies of a person other than an individual.
Signed at Washington, DC, this 17th day of March, 2026.
Daniel Aronowitz,
Assistant Secretary, Employee Benefits Security Administration, U.S.
Department of Labor.
[FR Doc. 2026-05492 Filed 3-18-26; 4:15 pm]
BILLING CODE 4510-29-P