ERISA FIDUCIARY ADVICE: THE REGULATORY LANDSCAPE ENTERING 2026
By Charles C. Shulman
Recent court decisions have effectively stopped the Department of Labor’s 2024 Retirement Security Rule from taking effect. Two federal courts stayed the rule, finding that the DOL likely exceeded its authority, and in November 2025 the DOL withdrew its appeal. The Fifth Circuit granted the dismissal, leaving the stays in place and preventing the rule and related PTCE amendments from becoming operative. As a result, fiduciary status for investment advice continues to be governed by the 1975 five-part test and PTCE 2020-02, alongside the SEC’s Regulation Best Interest.
The Department of Labor’s effort to revise the fiduciary investment-advice standard has become a recurring subject of rulemaking and litigation, with major definitional changes proposed under successive presidential administrations. The most recent development came in November 2025, when the Department of Labor (“DOL”) voluntarily dismissed its appeals of two district-court decisions that had stayed the 2024 Retirement Security Rule, and the Fifth Circuit granted the dismissal. As a result, the 2024 rule, and its accompanying amendments to the prohibited-transaction exemptions never took effect. ERISA fiduciary advice therefore continues to be governed by the 1975 five-part test and PTCE 2020-02.
I. The 1975 Rule and the 2016 Fiduciary Rule
ERISA’s investment-advice fiduciary definition originates in 1975, when the Ford Administration adopted a regulation providing that a person is a fiduciary only if all elements of a five-part test are satisfied. 40 Fed. Reg. 50842 (Oct. 31, 1975), DOL Reg. § 2510.3-21(c). The 1975 five-part test dictates that a person providing investment advice for a fee is a fiduciary with respect to a plan or IRA’s assets only if the advice (i) concerns the value or sale of investment property, (ii) is given on a regular basis, (iii) is provided under a mutual understanding that it will serve as (iv) a primary basis for the retirement investment decision, and (v) is individualized to the investor.
The 2016 Fiduciary Rule replaced the 1975 rule. The 2016 Fiduciary Rule, rule applied fiduciary status when a person made an investment recommendation regarding retirement plan or IRA assets, including one-time advice like rollovers, under circumstances where the adviser either (i) acknowledged they were acting as an ERISA fiduciary, or (ii) provided advice under an agreement that the advice was based on the recipient’s particular needs. This expansion brought brokers, insurance agents, and others, who were previously held only to a lower suitability standard, under ERISA’s stringent duties of care and loyalty, thereby protecting retirement savers from conflicted advice. To allow financial institutions to continue receiving common forms of compensation like commissions, the rule introduced new Prohibited Transaction Class Exemptions, most notably the Best Interest Contract Exemption (BICE), which mandated adherence to Impartial Conduct Standards and required a written contract acknowledging fiduciary status. 81 Fed. Reg. 21002 (Apr. 8, 2016).
However, in 2018, the Fifth Circuit vacated the 2016 Fiduciary Rule in full, holding that the DOL exceeded its statutory authority. Chamber of Commerce v. U.S. DOL, 885 F.3d 360 (5th Cir. 2018).
During the first Trump Administration, the DOL issued 2020 technical amendments to DOL Reg. § 2510.3-21 removing the vacated 2016 Fiduciary Rule from the regulations and reinstating the 1975 test. See 85 Fed. Reg. 40589 (July 7, 2020).
At the same time, the DOL adopted PTCE 2020-02, Improving Investment Advice for Workers & Retirees, 85 Fed. Reg. 82798 (Dec. 18, 2020). This exemption remains operative.
In 2019, the Securities and Exchange Commission adopted Regulation Best Interest (“Reg BI”), requiring broker-dealers, when making recommendations to retail customers, to act in the customer’s best interest and not place their own financial interests ahead of the investor’s. Reg BI created a federal securities-law “best interest” standard distinct from the ERISA fiduciary definition. See Regulation Best Interest, Exchange Act Release No. 34-86031, 84 Fed. Reg. 33318 (July 12, 2019). This is still in effect.
II. The 2024 Retirement Security Rule
In April 2024, under the Biden Administration, the DOL issued the 2024 Retirement Security Rule, which was intended to replace the 1975 five-part test with a modernized fiduciary definition based on adviser representations and investor expectations. Retirement Security Rule—Definition of an Investment Advice Fiduciary, 89 Fed. Reg. 32122 (Apr. 25, 2024).
Under the 2024 Retirement Security Rule’s three-element test, a financial professional would become an ERISA fiduciary if: (i) an investment recommendation was made to a retirement investor; (ii) it was provided for a fee; and (iii) the adviser either affirmatively stated fiduciary status or held itself out as a trusted adviser making individualized best-interest guidance. The rule also included amendments to PTCE 2020-02, designed to standardize conduct requirements across advisory and insurance channels.
These were scheduled to take effect September 23, 2024, but were stayed by litigation.
III. The 2024 Litigation and the 2025 Appeal Dismissal
Before the 2024 Retirement Security Rule took effect, two federal district courts stayed it: Federation of Americans for Consumer Choice, Inc. v. DOL, 742 F.Supp.3d 677 (E.D. Tex. June 2024); American Council of Life Insurers v. DOL, Docket No. 4:24-cv-00482, 2024 WL 3572297 (N.D. Tex. 2024). Both courts concluded that plaintiffs were likely to succeed in arguing that the DOL again exceeded its statutory authority by extending fiduciary obligations to sales practices and one-time recommendations.
In November 2025, the DOL filed an unopposed motion to voluntarily dismiss its consolidated appeals.
Citation: Mot. to Dismiss, Federation of Americans for Consumer Choice v. DOL, Case Nos. 24-40637 & 24-10890 (5th Cir. Nov. 2025). The Fifth Circuit granted the dismissal on November 28, 2025, leaving the district-court stays intact. Because the 2024 exemption amendments were part of the same rulemaking, they also never took effect.
IV. Where Things Stand Now—and What May Come Next
After the withdrawal of the DOL appeal, the 2024 Retirement Security Rule is not operative. The controlling fiduciary framework remains the 1975 five-part test in DOL Reg. § 2510.3-21. PTCE 2020-02, which permits receipt of compensation for advice under strict best-interest conditions, also remains in effect.
Because the 1975 five-part test requires advice to be given on a ‘regular basis,’ a one-time rollover recommendation ordinarily does not create ERISA fiduciary status unless the adviser is otherwise in an ongoing advice relationship that satisfies the ‘regular basis’ and ‘mutual understanding’ elements.
The DOL has not ruled out attempting a revised fiduciary rule, and any new proposal would likely face significant litigation, especially in the Fifth Circuit. Financial institutions must also continue navigating the practical overlay of ERISA fiduciary standards with 2019 SEC Regulation Best Interest (Reg BI) rule.
