The Department of Labor's Conflict of Interest proposal is significant on many fronts, not the least of which is how it redefines what it means to be a fiduciary.
Instead of the five-part test laid out in 1975, the new proposal offers a four-part test:
| 1975 rule: 5-part test | 2015 proposal: 4-part test |
|---|---|
| A person renders advice to the plan as to the value of or advisability of buying, selling, investing in securities or other property | Renders advice to a plan, plan fiduciary, plan participant or beneficiary, IRA or IRA owner |
| On a regular basis | Regular basis NOT required; once is enough |
| Pursuant to a mutual agreement, arrangement or understanding, written or otherwise, between the plan or plan fiduciary | Pursuant to a written or verbal agreement, arrangement or understanding … The advice will be individualized to the plan based on the particular needs of the plan |
| … that the services will serve as a primary basis for investment decisions | … that the advice is given for consideration in making investment or management decisions |
| The advice will be individualized to the plan based on the particular needs of the plan regarding such matters as investment policies or strategy, overall portfolio composition and diversification | … that the advice is individualized to, or that the advice is specifically directed to, the advice recipient |
Source: Pete Swisher, senior vice president of national sales at Pentegra Retirement Services
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