Employee Benefits
Back to the Future: DOL Reinstates 1975 Fiduciary Test
On March 20, 2026, the U.S. Department of Labor (DOL) published a final rule that formally removes the 2024 “Retirement Security Rule,” which was a Biden-era regulation that would have expanded who is considered a retirement “fiduciary” under ERISA. In its place, the DOL has restored a 1975 standard known as the “Five-Part Test,” which was used for nearly 50 years to determine when a financial professional is acting as a fiduciary.
Background
Under ERISA, fiduciaries must meet the highest standard of care when giving investment advice to retirement plans, 401(k) participants, and IRA holders.
For decades, the DOL relied on the Five-Part Test to determine fiduciary status. Over the years, several administrations have tried to replace it. In 2016, the Obama administration proposed a broader rule that expanded who was considered a fiduciary, but that rule was ultimately vacated by the courts.
In 2020, the first Trump administration took a different approach. Rather than rewriting the test, it issued Prohibited Transaction Exemption 2020-02 that reinterpreted how the existing Five-Part Test applied, particularly to rollover advice.
The Biden administration then tried again in 2024, replacing the Five-Part Test with a broader rule that would have applied fiduciary status more widely, including to one-time rollover recommendations made by brokers and insurance agents. That rule was challenged by industry groups. Two federal courts in Texas blocked it before it could take effect, and those rulings have now become final.
What This Means
The DOL’s new final rule does three things:
- Removes the 2024 Fiduciary Rule from the federal regulations, since it never actually went into effect.
- Restores the Five-Part Test as the governing standard for determining fiduciary status.
- Reinstates PTE 2020-02 in its original 2020 form, but notes that certain guidance in the preamble should no longer be relied upon in light of earlier court decisions.
What Employers Should Know
The return to the Five-Part Test narrows who is treated as a fiduciary. In general, an adviser is only considered an ERISA fiduciary if they provide investment advice on a regular basis under a mutual understanding that the advice will serve as a primary basis for investment decisions. As a result, one-time recommendations may fall outside fiduciary status. For example, an adviser who recommends that a departing employee roll over a 401(k) balance into an IRA may not be acting as an ERISA fiduciary.
This distinction is particularly relevant when employees leave an employer and seek guidance about their retirement savings. Advisers or call-center representatives who handle those conversations may not be subject to ERISA’s highest standard of care, even when making specific recommendations.
Employers may want to review their adviser relationships and engagement agreements to clarify which parties are acting as ERISA fiduciaries and which are not.
