Legal Updates & Alerts

DOL Proposes Broader Definition of ERISA "Fiduciary" Applicable to Investment Advisers

December 7, 2010
By Darcy Norville
On October 22, 2010, the Department of Labor ("DOL") published proposed regulations that would broaden the definition of when a person is an ERISA "fiduciary" by reason of giving investment advice to an employee benefit plan or a plan's participants. The proposed regulations would significantly expand (a) the types of advice and recommendations given to a plan, plan fiduciary, participant or beneficiary that may result in ERISA fiduciary status; and (b) the conditions that, if met, may cause the advice provider to be a fiduciary. An ERISA fiduciary can face personal liability for plan losses resulting from a breach of fiduciary duties.

Types of Advice
Under the proposed regulations, providing any of the following types of advice could trigger ERISA fiduciary status:
  • Advice, appraisals, or fairness opinions concerning the value of securities or other property;
  • Recommendations to invest, buy, sell, or hold securities or other property; or
  • Advice or recommendations concerning the management of securities or other property, including advice on the selection of persons to manage plan investments.

Conditions Required for Fiduciary Status
To be an ERISA fiduciary, the person providing the advice must also satisfy one of four conditions, which generally relate to the degree of authority, control, responsibility or influence the adviser directly or indirectly possesses, and the reasonable expectations of the persons receiving the advice. Either directly or indirectly (e.g., through or together with an affiliate) the person must:
  • Be an "investment adviser" as defined under the Investment Advisers Act of 1940;
  • Have represented or acknowledged ERISA fiduciary status with respect to the advice;
  • Be a fiduciary under either of the other parts of ERISA's fiduciary definition (having discretionary authority or control over management of the plan or its assets, or over plan administration); or
  • Provide advice or make recommendations under an agreement, arrangement or understanding, written or otherwise, that such advice may be considered in connection with making investment or management decisions with respect to plan assets, and will be individualized to the needs of the plan, a plan fiduciary or a participant or beneficiary.

The current requirements that advice be given "on a regular basis" and serve as a "primary basis" for plan investment decisions are proposed to be eliminated.

The proposed regulations include several exceptions, including exceptions for investment education and for situations in which a person (such as a recordkeeper) provides a limited number of investment alternatives from which a plan fiduciary may choose.

Written comments on the proposed regulations must be submitted to the DOL by January 20, 2011.

For more information regarding the proposed regulations please contact Darcy Norville (, 503-802-2036), or one of the members of the financial services practice group.