Out With the New, In With the Old: The “Five-Part Test” Rides Again

On March 20, 2026, the U.S. Department of Labor (DOL) published formal guidance implementing the recent judicial vacatur of the DOL’s 2024 “Retirement Security Rule,” which sought to redefine the concept of an “investment advice fiduciary” — that is, a person who is deemed to be a “fiduciary” for purposes of the Employee Retirement Income Security Act of 1974, as amended (ERISA), or Section 4975 of the U.S. Internal Revenue Code of 1986, as amended (the Code), by virtue of providing “investment advice” to certain retirement plan investors, such as ERISA plans and individual retirement accounts (IRAs).

Since 1975, the framework for defining “investment advice fiduciary” has been the so-called Five-Part Test: A person is a fiduciary if (1) they render advice to a plan as to the value of securities or other property, or make recommendations as to investing in, purchasing, or selling securities or other property (2) on a regular basis, (3) pursuant to a mutual agreement, arrangement, or understanding with the plan that (4) the advice will serve as a primary basis for investment decisions with respect to the plan’s assets, and (5) the advice will be individualized based on the particular needs of the plan. The Biden-era Retirement Security Rule represented the latest attempt by the DOL to update and expand the definition of an “investment advice fiduciary.”

As discussed in this previous client Update, however, the Retirement Security Rule and related amendments to Prohibited Transaction Class Exemption (PTCE) 2020-02 (providing an exemption to investment advice fiduciaries for certain compensation arrangements) were stayed by two Texas federal district courts in July 2024. Final court orders vacating the Retirement Security Rule and portions of the preamble to PTCE 2020-02 (in which the DOL had offered an interpretation of the Five-Part Test) were entered earlier this month. Therefore, the DOL’s recent guidance formally implements those decisions.

As a result, the framework for determining whether a person is an “investment advice fiduciary” is, once again, the longstanding Five-Part Test. In addition, the DOL also removed the preamble to PTCE 2020-02 in its entirety, citing potential ambiguity regarding what portions of the preamble remain valid following the court’s partial vacatur, and reinstated the operative text of PTCE 2020-02 in its original form, repealing amendments to PTE 2020-02 issued alongside the Retirement Security Rule. While this marks the end of a period of uncertainty for service providers to ERISA plans and IRAs, the DOL’s regulatory agenda indicates that further guidance on this topic may be upcoming. But at least for the time being, the Five-Part Test rides again.