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DOL Proposes New ERISA Rule to Expand the Definition of Fiduciary

October 29, 2010

By Lawrence J. Hass, Joshua H. Sternoff & Jonathan Panek

On October 21, 2010, the Department of Labor (the DOL) issued a new proposed regulation (the Proposed Rule) that would expand the categories of persons who would be deemed to be fiduciaries subject to the Employee Retirement Income Security Act of 1974 (ERISA). The Proposed Rule would re-write and expand the scope of the current 35-year old regulation (the Current Rule) that delineates when a person becomes a fiduciary by reason of providing investment advice for a fee or other compensation with respect to plan assets.

In issuing the Proposed Rule, the DOL noted that the retirement plan industry has changed significantly in the 35-year period since the Current Rule was adopted, the most significant trend being the growth of participant-directed defined contribution plans, along with the expectations of plan officials and participants and beneficiaries to receive investment advice that is free from conflicts of interest. The broadened definition is also intended to improve DOLs ability to enforce ERISA violations against investment advisers by reducing the amount of time and resources required to establish that an investment adviser is a fiduciary under the Current Rule.