Labor Department announces new rule to shield retirement savings

The U.S. Department of Labor (DOL) on Tuesday announced a new rule that governs retirement advice, requiring more financial advisers to follow stricter fiduciary standards when dispensing advice about retirement-focused investments.

The rule is designed to “protect the millions of workers who are saving for retirement diligently and rely on advice from trusted professionals on how to invest their savings,” DOL said in its announcement. “This final rule will achieve this by updating the definition of an investment advice fiduciary under the Employee Retirement Income Security Act and the Internal Revenue Code.”

Taking effect on Sept. 23, 2024, the rule will apply “when trusted financial services providers give compensated investment advice to retirement plan participants, individual retirement account owners and plan officials responsible for administering plans and managing their assets,” DOL explained.

Acting Labor Secretary Julie Su said that the new rule aims to insulate retirees who seek investment advice from professionals who may offer “improper” investment advice, or may not otherwise air conflicts of interest.

“Retirement investors can now trust that their investment advice provider is working in their best interest and helping to make unbiased decisions,” she said.

For investment professionals, the rule will also aim to ensure a level playing field, rather than individuals being hindered by a system that may have unclear requirements for advisers based on the products they choose to recommend, DOL stated.

“Firms and investment professionals that are working hard to give advice in retirement investors’ best interest should not be penalized for responsibly managing their conflicts of interest and making prudent and loyal recommendations,” DOL explained. “Retirement investors are best protected by a uniform and protective framework.”

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