Court Yanks DOL's Investment Guru Rule: Back to 2020 Basics!
Published Date: 3/20/2026
Rule
Summary
The court has canceled the Department of Labor’s 2024 rule that changed who counts as a trusted investment advisor for retirement plans. Starting April 20, 2026, the old rules from 2020 will be back in charge, affecting financial advisors and retirement plan managers. This means advisors should review their practices to stay on the right side of the law and avoid costly mistakes.
Analyzed Economic Effects
5 provisions identified: 2 benefits, 2 costs, 1 mixed.
Ineligibility and Penalty Timelines
Under PTE 2020-02, an Investment Professional or Financial Institution becomes ineligible to rely on the exemption for 10 years after a qualifying conviction or a written ineligibility notice. A Financial Institution that is ineligible has a one-year winding down period during which relief is available, and there are specific petition and timing procedures (e.g., petitions within 10 business days, 21-day and 6-month timeframes) described in the exemption.
2024 Fiduciary Rule Vacated
On April 20, 2026, the Department of Labor removed the 2024 Retirement Security Rule from the CFR and restored the prior 1975 Five-part Test definition of who counts as a fiduciary under ERISA and the Internal Revenue Code. This change determines which investment advice is treated as fiduciary advice for plans and IRAs.
PTE 2020-02 Compliance Duties
PTE 2020-02 requires Financial Institutions and Investment Professionals to follow Impartial Conduct Standards including a best-interest standard, provide written fiduciary acknowledgments and conflict disclosures, and document specific reasons for rollover recommendations. The exemption also requires an annual retrospective review, a written report to a Senior Executive Officer, and retention of report, certification, and supporting data for six years.
Self-Correction Safe Harbor Rules
PTE 2020-02 allows a Financial Institution to avoid a non-exempt prohibited transaction if the violation did not cause losses or the institution made the Retirement Investor whole, corrected the violation, and notifies the Department of Labor via email within 30 days of the correction. The correction must occur no later than 90 days after the institution learned of the violation.
Preamble Guidance Declared Unreliable
The Department says the preamble to Prohibited Transaction Exemption (PTE) 2020-02 is effectively vacated and not reliable after several court vacaturs. The agency republished the operative text of PTE 2020-02 (as of December 18, 2020) without the 2024 amendments to prevent stakeholders from relying on potentially invalidated preamble guidance.
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Key Dates
Department and Agencies
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