The Department of Labor (DOL) issued a final rule implementing recent federal court decisions from Texas. The final rule removes the Retirement Security Rule issued on April 25, 2024, and restores the Prohibited Transaction Exemption (PTE) 2020-02 to its original text from December 18, 2020.
The Retirement Security Rule from 2024 generally redefined an investment advice fiduciary as someone who receives compensation to make an investment recommendation to a retirement investor. This impacted both qualified retirement plans and individual retirement accounts (IRAs). Also in 2024, the DOL amended various PTE rulings, including PTE 2020-02. In July of 2024, each of the district courts for the Eastern and Northern District of Texas granted motions to stay the effective date of these 2024 changes.
The DOL final rule issued on March 20, 2026, restores the five-part test that has been in place since 1975. Under the five-part test, a person is considered a fiduciary if the investment advice is:
- Recommending the purchase, sale, or value of securities or investment property for a fee,
- Given on a regular basis,
- Pursuant to a mutual agreement or understanding,
- The primary basis for the investment decision, and
- Individualized to the needs of the retirement saver.
The final rule will also revert PTE 2020-02 formally to its original text from December 18, 2020, and the DOL noted in a footnote that the website will be updated to reflect the pre-amendment changes of the other PTE amendments included in the 2024 changes.
In a March 18, 2026, News Release, the DOL indicated that there will be no comment period offered for this update.