DOL Reinstates Historic “Five-Part” Fiduciary Test

On March 17, 2026, the U.S. Department of Labor (DOL) adopted a Final Rule defining who is a fiduciary under the Employee Retirement Income Security Act of 1974, as amended (ERISA). The DOL confirmed in the regulatory release that it is returning to the historic “five-part test” (first adopted in 1975) for purposes of determining who is an ERISA fiduciary, while also keeping in effect Prohibited Transaction Exemption 2020-02 (PTE 2020-02) (which provides an exemption for certain otherwise impermissible transactions involving plans subject to ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended (Code)). This Final Rule ends many years of uncertainty under the fiduciary and prohibited transaction rules and is viewed as welcome news for the financial services industry. Understanding whether or not a financial institution and its employees and agents are acting in a fiduciary capacity for purposes of ERISA or the Code is critical from a compliance and risk management perspective. This is because a person or entity acting as an ERISA fiduciary is restricted by the prohibited transaction rules and related exemptions and, in the case of interactions with a plan subject to ERISA, also subject to strict statutory fiduciary duties.

The Final Rule is the culmination of a 15-plus-year-long regulatory battle over who should be treated as a fiduciary for purposes of ERISA. Prior administrations made multiple efforts to redefine, and generally expand, the scope of who is an ERISA fiduciary, all of which were met with intense industry opposition and/or litigation. For background, see our May 2024 Advisory. The current action by DOL to officially reinstate the five-part test was specifically driven by a recent federal district court decision to vacate DOL’s 2024 proposal to expand fiduciary status (the vacatur was a follow up to a July 2024 finding by the district court that the 2024 proposal likely conflicts with ERISA under the landmark Loper Bright Supreme Court decision which overturned Chevron deference to agency interpretations).

DOL’s decision to reinstate the five-part test, along with its decision not to revoke PTE 2020-02 (although the DOL did renounce the preamble to PTE 2020-02 as “no longer reliable”), provides financial institutions with a level of regulatory stability and useful tools to structure their businesses and manage risk that has been lacking for many years. Banks, trust companies, investment advisors, and others in the financial services industry who provide services to ERISA plans and IRAs will want to review their policies, procedures, and employee training as they take into account how the Final Rule may impact their business practices and/or provide opportunities to expand their services to ERISA plans and IRAs.

© Arnold & Porter Kaye Scholer LLP 2026 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.