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Status

Where It Stands

Three attempts to redefine investment advice fiduciary status have been made since 2016. As of this paper's publication, the original 1975 definition is back in force.

1
The Timeline
From the 1975 five-part test back to the 1975 five-part test
Date Event
1975 DOL adopts the five-part test for when investment advice makes a person an ERISA fiduciary
2016 - 2018 DOL adopts a broader fiduciary rule; the US Court of Appeals for the Fifth Circuit vacates it in 2018
December 18, 2020 DOL publishes PTE 2020-02, an exemption allowing investment advice fiduciaries to receive conflicted compensation if they meet its conditions; effective February 16, 2021[3]
2024 DOL adopts the Retirement Security Rule, broadening fiduciary status, with amendments to PTE 2020-02
July 25 and 26, 2024 Two federal district courts in Texas stay the 2024 rule; the Northern District court also stays the PTE 2020-02 amendments[1]
July 9, 2025 The Northern District of Texas vacates portions of the PTE 2020-02 preamble relating to the five-part test[1]
March 20, 2026 DOL publishes notice removing the 2024 rule from the Code of Federal Regulations and reinstating the five-part test, effective April 20, 2026; it treats the entire PTE 2020-02 preamble as effectively vacated, while the exemption's operative conditions remain[1][2]

DOL stated in March 2026 that it had no current plans for further notice-and-comment rulemaking on the subject, while leaving open additional guidance.[2]

2
What Applies Today
The five-part test for fiduciary status, and PTE 2020-02 for firms that rely on it

Under the restored 1975 regulation, a person gives fiduciary investment advice to a plan or IRA when, for a fee, they give advice on the value of securities or other property or recommendations on investing in them, and all five elements are met:

  1. the advice concerns the value of, or the advisability of investing in, securities or other property;
  2. it is given on a regular basis;
  3. it is given under a mutual agreement, arrangement or understanding;
  4. that the advice will serve as a primary basis for investment decisions; and
  5. that it will be individualized to the plan's or IRA's particular needs.

Where a firm or advisor meets that test and receives compensation that would otherwise be a prohibited transaction - commissions, revenue sharing, or fees that vary with the recommendation - it typically relies on PTE 2020-02 and must satisfy its conditions.[3] Separately, plan sponsors and other plan fiduciaries remain subject to ERISA's prudence standard for the investments they select.[4]

Whatever the definition of fiduciary status, the standard a fiduciary must meet is prudence - and prudence is judged by how well the fiduciary understood and watched the investment.

1
Prudence Is a Process
Investigate before, monitor after

ERISA's prudence standard requires a fiduciary to act:

"with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims" ERISA § 404(a)(1)(B), 29 U.S.C. § 1104(a)(1)(B) [4]

The standard is "familiar with such matters" - an expert's understanding, not a layperson's. In practice, prudence is assessed by the quality of the process: whether the fiduciary investigated the investment before acting, considered its costs and risks, and kept watching it afterward. The Supreme Court confirmed the second half of that in 2015:

"Under trust law, a trustee has a continuing duty to monitor trust investments and remove imprudent ones." Tibble v. Edison International, 575 U.S. 523 (2015) [5]

Investigate before, monitor after. That is Know-Your-Product under another name. A firm that can show a documented assessment of each investment and evidence of ongoing monitoring has most of what a prudence review asks for; a firm that can't will struggle to show prudence however good its intentions.

2
PTE 2020-02 Conditions
Three conditions with direct KYP consequences

PTE 2020-02 covers SEC- and state-registered investment advisers, broker-dealers, banks and insurance companies, and their representatives, that are investment advice fiduciaries. Its conditions include three with direct product-knowledge consequences:[3]

  • The Impartial Conduct Standards. Advice must meet a best interest standard that incorporates the same care, skill, prudence and diligence language as ERISA. Meeting it depends on understanding the investment being recommended.
  • Written policies and procedures. Financial institutions must adopt written policies and procedures prudently designed to ensure compliance with the Impartial Conduct Standards. For product knowledge, that means a documented product review and monitoring process.
  • An annual retrospective review. Financial institutions must conduct an annual review of their compliance, documented in a written report certified by a senior executive officer. That review is a natural point to test whether the product review process worked.

The retrospective review is the condition most specific to the DOL framework. Neither Reg BI nor the Advisers Act requires a senior executive to certify a written review of the firm's compliance each year in the same way; the adviser compliance rule requires an annual review of policies but not this certification.[7]

3
One Product File, Three Standards
How the same product knowledge supports Reg BI, the adviser fiduciary duty and ERISA prudence

A firm serving retirement investors may be subject to Reg BI for brokerage recommendations, the Advisers Act fiduciary duty for advisory accounts, and PTE 2020-02 when its advice is fiduciary advice to a plan or IRA. All three require the firm to understand what it recommends. A single product review process can support all three if it is built to the most demanding element of each.

Element Reg BI Adviser Fiduciary Duty ERISA / PTE 2020-02
Product-level standard Understand risks, rewards and costs[6] Reasonable investigation into the investment[8] Care, skill, prudence and diligence of a prudent expert
Ongoing monitoring Implied by understanding at each recommendation Within the scope of the relationship Continuing duty to monitor for plan fiduciaries (Tibble)
Written procedures Compliance Obligation Rule 206(4)-7 Policies prudently designed to ensure compliance
Annual review Not specifically required Annual review of policies (Rule 206(4)-7) Annual written retrospective review, certified

For the Reg BI side, see Reg BI and KYP; for a comparison with Canada, see Canada vs US: KYP Standards Compared.

Application

The Practice

For product knowledge, the DOL framework adds less a new process than a higher standard of evidence and an annual check that the process worked.

1
Responsibilities
What the firm and the individual advisor need to do for retirement business
What the Firm Needs to Do
  • Identify fiduciary advice. Determine which retirement recommendations meet the five-part test and rely on PTE 2020-02.
  • Apply a prudent-expert product review. Document the investigation of each investment offered to retirement investors, including costs and risks.
  • Monitor continuously. Treat ongoing monitoring as part of prudence, not an optional extra.
  • Write prudently designed procedures. Covering how products are reviewed, approved and monitored for retirement accounts.
  • Test the process annually. Include product review and monitoring in the retrospective review, with senior executive certification.
  • Track the rules. Monitor further DOL guidance and litigation, and update procedures when the position changes.
What the Individual Advisor Needs to Do
  • Understand each investment. To the standard of someone "familiar with such matters."
  • Use the firm's review, and go beyond it. Treat the product file as a starting point, not a substitute for understanding.
  • Recommend within approvals. Only products the firm has reviewed for retirement accounts.
  • Stay current. Review product change notices and updated assessments.
  • Know when the exemption applies. Understand which of their retirement recommendations are fiduciary advice.
2
Documentation
A retirement addendum to the firm's product review procedures

The example below shows how a firm might add retirement-specific requirements to its existing product review procedures. It is illustrative; each firm's procedures should reflect its business, the exemptions it relies on, and legal advice on the current rules.

Example: Retirement Addendum to Product Review Procedures
Illustrative
1
Scope. Applies to every investment recommended to plan participants, plans or IRA owners where the firm acts as an investment advice fiduciary and relies on PTE 2020-02.
2
Standard. Product reviews for retirement accounts are conducted to a prudent-expert standard, documenting the investigation of each investment's structure, costs, risks and expected behaviour.
3
Approval. Only investments approved by the Product Committee for retirement accounts may be recommended in them. The approval record states the basis for the decision.
4
Monitoring. Approved investments are monitored for significant changes under the firm's monitoring procedures, and reassessed at least annually.
5
Retrospective review. The annual retrospective review under PTE 2020-02 includes testing of product review and monitoring for retirement investments. The written report is certified by a senior executive officer.
6
Regulatory tracking. Compliance reviews DOL guidance and litigation at least quarterly and updates this addendum when the rules change.
7
Records. Product reviews, approvals, monitoring records and retrospective review reports are retained and linked to each investment.
Five Questions to Test Retirement KYP
  1. Does the firm know which of its retirement recommendations are fiduciary advice under the restored five-part test?
  2. Would its product files for retirement investments show the investigation a prudent expert would make?
  3. Is ongoing monitoring documented for every investment recommended to retirement investors?
  4. Does the annual retrospective review test product review and monitoring, not only conflicts and disclosures?
  5. Is someone responsible for tracking DOL rule changes and updating procedures?
A note on scope: This paper describes the status of the DOL fiduciary rule and PTE 2020-02 as of its publication date, and their implications for product knowledge. The rules in this area have changed frequently and remain subject to litigation and future guidance; firms should confirm the current position. This paper does not address client-specific requirements. It is general information, not legal or compliance advice. The comparison table and example addendum are illustrations, not prescribed requirements. Where statutes, cases and guidance are quoted, the quotation is from the source cited.
References
  1. U.S. Department of Labor, Employee Benefits Security Administration. Retirement Security Rule: Definition of an Investment Advice Fiduciary: Notice of Court Vacatur, Federal Register, March 20, 2026 (effective April 20, 2026). Source document
  2. NAPA. DOL 'Restores Long-Standing Investment Advice Rule', March 2026. Source document
  3. U.S. Department of Labor. Prohibited Transaction Exemption 2020-02, Improving Investment Advice for Workers and Retirees, Federal Register, December 18, 2020 (effective February 16, 2021). Source document
  4. Employee Retirement Income Security Act of 1974, section 404(a)(1)(B), 29 U.S.C. § 1104(a)(1)(B). Source document
  5. Tibble v. Edison International, 575 U.S. 523 (2015), decided May 18, 2015. Source document
  6. U.S. Securities and Exchange Commission. Regulation Best Interest, 17 C.F.R. § 240.15l-1(a)(2)(ii)(A). Source document (PDF)
  7. U.S. Securities and Exchange Commission. Rule 206(4)-7 under the Investment Advisers Act of 1940, 17 C.F.R. § 275.206(4)-7. Source document
  8. U.S. Securities and Exchange Commission. Commission Interpretation Regarding Standard of Conduct for Investment Advisers, Release No. IA-5248, June 5, 2019. Source document (PDF)